WSJ - Rich Americans borrow to live off their paper wealth

[ATCclears]

Rising stocks and rock-bottom interest rates have delivered a big perk to rich Americans: cheap loans that they can use to fund their lifestyles while minimizing their tax bills. Banks say their wealthy clients are borrowing more than ever before, often using loans backed by their portfolios of stocks and bonds. The loans allow borrowers who need cash to avoid selling in a hot market. The super rich often use these loans as part of a "buy, borrow, die" strategy to avoid capital-gains taxes. For borrowers, the calculation is clear: If an asset appreciates faster than the interest rate on the loan, they come out ahead. And under current law, investors and their heirs don't pay income taxes unless their shares are sold. President Biden and congressional Democrats have taken aim at some of those rules, saying they amount to a giant escape hatch from the income-tax system for the richest Americans.

Buy, Borrow, Die: How Rich Americans Live Off Their Paper Wealth

The wealthy are borrowing more than ever, using low-interest loans backed by their investments in a strategy known as “buy, borrow, die.”

www.wsj.com

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[nwdaily]

I guess they didn't get rich by being stupid. Money is being printed out of thin air, more dollars are chasing the same assets/ goods this is leading to higher prices Those who hold assets or, buy assets before the inflation really cranks up are in a good position to hedge against inflation.
As for taxing unrealized capital gains... it's so stupid they just might do it.

 

[chukar]

Playing the game by the rules and winning for now.

I like it..

 

[The Heretic]

The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

Supposedly all legal, right? I don't blame people for using the law to their advantage, that is the smart move. But it says something about our tax code. Agreed. I think our entire tax structure needs an overhaul but it is what it is. I don't blame anyone for following the law to maximize...

www.northwestfirearms.com

I would do the same thing if I was able to. I avoid taxes as much as I legally can.

 

[ma96782]

Buy, Borrow, Die.

Yup.....a tax strategy that is allowed.

And don't forget....
About founding/funding/making a "charity" (which you will donate to and get a charitable deduction for) and installing your kids as directors with large salaries. Qualifications.....nah. It's it enough that they are related.

Still looking for a job for the kids?
Encourage your kids to become an "Artist".

Aloha, Mark

PS......and don't forget to fund your Roth IRA with your own company's stock (purchased, at a discount price).

Thiel, who first opened his Roth IRA in 1999, was able to grow his account so quickly by placing 1.7 million shares of his company PayPal (which was then private) into the Roth IRA when they were valued at just $0.001 per share. In just a year, the value of his account had grown from $1,664 to a staggering $3.8 million, a 227,490% return on investment, according to the tax documents.

Taken from :

PayPal founder Peter Thiel amassed $5B fortune in Roth IRA, tax leak reveals

 

[Soli]

The laugh-till-you-throw-up line from the article has to be:

"First, making loan proceeds taxable would mark a fundamental shift in income taxation."

Indebting myself would now be income?

Destroy the language: check.
Create rules that encourage secrecy, cheating and promote a black market: check. (Off book loans for the win!)
Invent another "need to know" (how much did you borrow this year, comrade?) reason to gather info on your financial doings: check.
Appeal to simpleton electorate by claiming to target "The Rich": check.

Yeah, it checks a number of 2021 "political good idea" boxes.

 

[ma96782]

Nah.....Bitcoin.

The choice of the criminal underworld.

Aloha, Mark

 

[Alexx1401]

As with all tax law, people with real money lobby for more laws. Then the law makers who pass these laws run to camera's to talk about "loopholes". Never bothering to mention that they made the loopholes. Can't blame them. They stand there and rant about laws they passed, while they tell the voters they will "fix this" and the same idiots vote them back in. Got to be a LOT of laughter behind closed doors about how easy it is.

 

[BBQ Guy]

Its not who wins the game, but how you play it.
Cant fault somebody for knowing how to play the game better....

 

[Barefootdog]

The last great pool of available wealth to support the welfare state and grown government authority over your life is inheritable wealth......rest assured the government will do anything and everything necessary to get their hands on it.

......and nobody in this thread takes issue with the IRS leaking 15 years of tax returns for the wealthiest 30 American citizens?

We don't have a taxing problem....we have a spending problem.

Steal everything the wealthiest Americans own....everything.....investments, real estate and personal property....and we fund the government for 2-3 days.

Rest assured the middle class will not be exempt from the taking....it's just a question of when it becomes your turn. The Cognitive Vegetable in the White House wants to hire an additional 85,000 IRS agents. That would more than DOUBLE the current number of 74,454 IRS employees. And you think they're not coming after you and me?

Envy is one of the 7 deadly sins.....that's what the Senile Pedifile and the Unhappy Hooker are selling.

 

[thorborg]

Nothing new here.

"all progress is based on a universal innate desire on the part of every living organism to live beyond its income"
Samuel Butler 1835 - 1902

 

[Aero Denezol]

Sure, a lot of fortunes have been made from private businesses gaming government programs. Many of the companies who took PPP or SBA loans didn't need the money, but they qualified nonetheless.

Rich people have given me a lot of opportunities. They are rich for a reason. Most of the rich take risks that ordinary people are unwilling to take. Most of the rich that I know have gone broke several times and then won it all back. Unlike many people who are broke and just sit on their butt complaining about how things are unfair.

If I have to choose between the rich and a committee of bureaucrats claiming to know what is good for me, I choose the rich every time.

 

[BBQ Guy]

Sure, a lot of fortunes have been made from private businesses gaming government programs. Many of the companies who took PPP or SBA loans didn't need the money, but they qualified nonetheless.

Rich people have given me a lot of opportunities. They are rich for a reason. Most of the rich take risks that ordinary people are unwilling to take. Most of the rich that I know have gone broke several times and then won it all back. Unlike many people who are broke and just sit on their butt complaining about how things are unfair.

If I have to choose between the rich and a committee of bureaucrats claiming to know what is good for me, I choose the rich every time.

Ive said that as well.

While I'm not a Trump fan. I often heard folks complain that he'd been bankrupt and broke a few times. Often finishing their speech with not wanting a failed business leader as a political business leader.
I'd take the guy the guy that has seen failure and success a few times over the guy that doesn't know what failure looks like.

Folks who can fail and rebuild are not only smart but often have the edge on wisdom.

 

[ma96782]

It's NEVER.....really over is it?

But crypto losses are treated differently than those of stocks and mutual funds. That's because so-called wash sale rules don't apply, according to financial advisors.

This offers two benefits to crypto investors: They can sell crypto for a loss, and then use that loss to reduce or eliminate capital gains tax on winning investments. Then, they can quickly buy back the crypto they sold so as not to miss out on a subsequent rebound in price.

Taken from.......

Bitcoin crash opens door to a tax loophole for investors

Investors in bitcoin, ethereum, dogecoin and other cryptocurrencies can leverage losses in a way that typical stock owners can't.

www.cnbc.com

Aloha, Mark

 

[Soli]

Good article:

The Boomer Wealth Boom

The struggle is just beginning.

 

[BBQ Guy]

Good article:

The Boomer Wealth Boom

The struggle is just beginning.

...And we were told that wouldnt happen by his knob gobbling supporters.
I hate the left, i hate bureaucrats, and i hate taxes. How do we get rid of all 3 in one fell swoop?

 

[The Heretic]

Good article:

The Boomer Wealth Boom

The struggle is just beginning.

When you have worked for 50+ years, your income generally increases, you hopefully pay off debt (if you are wise) and you can afford to invest in retirement funds more and set aside more (if you live well within your means). The more you have invested, the more it grows as a 1% increase is $5K when the principal is $500K - so far this year I have had a 10+% return on my accounts YTD (6 months).

Also, if you own real estate, you pay off the mortgage faster and faster and the property appreciates - mine has doubled in value since I bought it, and my equity has almost doubled from 37% to 71%. So yeah, my net worth in the past decade has increased 5-6X.

This is with my taxable income decreasing by 50% since last April

 

[Soli]

The proof is in the eating; the ability to accumulate wealth via tax favored retirement vehicles controlled by the individual far exceeds defined benefit schemes. Even for those who don't make enough to be considered even close to "wealthy".

The drawback, perhaps a fatal drawback? They do not help the dumb.

They are also temptations; even the non-dumb (uhem... excuse me while I cover that mirror...) can screw them up by making dumb decisions. Even the fire and forget methods - that work - take discipline to just let them be. The more active methods can easily become "hold my beer" episodes.

Since the dumb vote, and there are plenty of "it's not your fault!" politicians, I can imagine the current system being "improved" to be not nearly as productive.

 

[The Heretic]

When you have worked for 50+ years, your income generally increases, you hopefully pay off debt (if you are wise) and you can afford to invest in retirement funds more and set aside more (if you live well within your means). The more you have invested, the more it grows as a 1% increase is $5K when the principal is $500K - so far this year I have had a 10+% return on my accounts YTD (6 months).

Also, if you own real estate, you pay off the mortgage faster and faster and the property appreciates - mine has doubled in value since I bought it, and my equity has almost doubled from 37% to 71%. So yeah, my net worth in the past decade has increased 5-6X.

This is with my taxable income decreasing by 50% since last April

That said, the article has interesting data as to public sector pensions vs IRAs/401Ks

 

[The Heretic]

The proof is in the eating; the ability to accumulate wealth via tax favored retirement vehicles controlled by the individual far exceeds defined benefit schemes. Even for those who don't make enough to be considered even close to "wealthy".

The drawback, perhaps a fatal drawback? They do not help the dumb.

They are also temptations; even the non-dumb (uhem... excuse me while I cover that mirror...) can screw them up by making dumb decisions. Even the fire and forget methods - that work - take discipline to just let them be. The more active methods can easily become "hold my beer" episodes.

Since the dumb vote, and there are plenty of "it's not your fault!" politicians, I can imagine the current system being "improved" to be not nearly as productive.

The fact that the private sector retirement funds, such as IRAs/401Ks do better than public sector gov managed funds, is worth noting. Then there is the fact that those pension funds often are not passed onto heirs, is another big issue. E.G., my mother and father both had public pensions (PERS) but my mother got very little of my father's pension when he died, and none of us kids got a penny of their pensions when my mother died. Also, my kids won't get but about $250 of my SS benefits when I die, even though I paid in about $300K over the decades - which is why I have set aside considerable $ in my IRAs and my 401K for my daughter.