5 ms·

Doesn't seem fair to tax someone on appreciated stock if they haven't sold and haven't taken any loans against it.

• odie5533 10mo ago
  The taxes would be refundable.
  • anonymousiam 10mo ago
    Would they pay interest?
  • ENGNR 10mo ago
    How does that work in practice? If you're bootstrapped, borrow a bunch of money to pay tax because your company got to $10M val. But then the market shifts and it goes back down to $0 in later years, do you get the money back? Even if you do, it sounds weird taxing someone for the right to create something, especially when they're still in the middle of creating it.
    • jjmarr 10mo ago
      Yes, you do get the money back, that's the point of the paper. This is better for many founders that otherwise wouldn't cash out at all. VCs will be forced to cover your unrealized capital gains taxes.
  • robocat 10mo ago
    Refundable taxes are often gamed? See Cum-Ex: Dividend Withholding Tax (WHT) Fraud and Missing Trader Intra-Community (MTIC) Fraud.
• NewJazz 10mo ago
  Yeah I'm in favor of leverage == taxable event. I think the meaningful difference between leveraged and unleveraged capital gains is that when you take a loan, you access liquidity via your ownership in the asset. If you had gotten a dividend, that would have been taxable. A loan with a stock backing it isn't the same thing, but it does have a somewhat similar effect.
  • Workaccount2 10mo ago
    You still need to pay off that loan eventually though. These asset backed loans are just regular loans with lower interest rates. So instead of getting $50M @ 11% they can get it at 4%. That's the extent of the "hack". They then keep the ball rolling by refinancing at each expiry and just paying the interest (and hoping their assets maintain or increase in value) Eventually those loans will need to be repaid and the money will need to come from realizing capital gains. So if anything its a tax deferral scheme with a low interest rate and elevated liquidation risk. Which all raises the issue of being taxed twice on the same money. Taxes once when you take the loan against it, and taxed again when you realize the profit to pay the loan.
    • fragmede 10mo ago
      non-recourse loans don't require payback in case the startup goes under
      • Workaccount2 10mo ago
        It doesn't require the debtor to pay back the difference between the collateral liquidation value and the loan value. I don't think any bank though is giving non-recourse loans for risky or depreciating assets (investors do that). It's usually for things that the bank is confident will be a good investment anyway if the loan goes sour - you default on the loan? Fine. But we keep the land.
        • adastra22 10mo ago
          For late-stage “startups” (e.g. Series D+ companies that have just not IPOd) they have done this in the past, but that was in the pre-COVID tech mania. Often they act as middleman, finding someone else that wants exposure to the startup when interest is oversubscribed.
    • ENGNR 10mo ago
      The trick is that the USA steps up the buy price of an asset when you pass away. So if you use cheap loans your whole life, you can defer capital tax until it goes away. Instead of two certainties in life being death and taxes, it's now death or taxes.
• aaronblohowiak 10mo ago
  Especially if it is illiquid
• AngryData 10mo ago
  Why not? I could say the that it is unfair to tax people on income that they haven't spent too. Or property taxes raising for a property they haven't sold. If I wait to pickup my payroll check until after the year rolls over despite earning that money already, should I not pay taxes on it for that previous year?
  • JumpCrisscross 10mo ago
    Allow for deferral, but at the risk-free rate. If the asset goes bust, the tax isn’t owed.
  • elemdos 10mo ago
    At least in the case of stock, it’s possible they can’t sell it to pay the tax
    • lazide 10mo ago
      That is typically the case (depending on the timeline) for all but publicly traded or relatively sought out/well known private firms. Even for many of those, it’s not going to be easy. You can’t just go out and start selling stock to the public without a huge amount of legal paperwork.
    • AngryData 10mo ago
      That seems like a buyer beware situation. Nobody forced them to invest money in it, and if they lose out in the end that is the risk they take, the same with any other investment. You can't buy a piece of commercial property and not pay any taxes, or start a business and then claw back taxes you already paid because it failed later on down the road.
      • pfannkuchen 10mo ago
        Would you only apply this to stocks acquired after the new tax law was passed then?
        • 10mo ago
• deleted 10mo ago
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