So I keep hearing this narrative that billionares are to avoid taxes by taking out loans against their stock. I have some questions about how this mechanism actually works.
- In order to pay of the loan, don't they need to eventually sell their stock? Aren't there gains taxed at this point?
- Aren't they losing money in this transaction by needing to pay interest on the loan? Why would banks agree to loan out money for low interest rates to a billionare? What do they gain from this?
- This whole trasaction is a huge gamble anyway right? Say the value of their collateral stock suddenly fell. Wouldn't they now be stuck paying paying additional interest on a loan principle, while not having the collateral to pay the loan back.
- How much money/stock does someone need to use this strategy effectively. 1m, 10m, 100m... or does it really only apply when you are dealing in the billions.
If someone has a good resource to explain this please link it to me. I tried looking up some videos to explain this, but they all feel like AI generated click bait nonsense (example https://youtu.be/romlLCtU0QQ).
Some claims this video made that sounded strange:
- Bezos avoid 40M in income taxes by showing that he spent more than that in bussiness expenses.
- This just sound like a regular bussiness tax write off that any bussiness owner could and would do. Its only possible if he is honestly re-investing his personal money back into his own bussiness right?
- Elon would have to pay 120B a year in taxes if he was taxed fairly
- This claim also sound irrational. Given his net worth is roughly ~200b
- Billionares get favoral loans from banks at rates of 1%.
- This claim might be true, but I don't see what a bank would stand to gain by giving out 1% interest rate loans to billionares. Wouldn't the bank get better returns by investing that cash in nearly any other asset?
Submitted May 30, 2024 at 11:24PM by versaceblues https://ift.tt/CrEDFUj
