How The Rich Never Need to Pay Tax - How Money Works -
HTML-код
- Опубликовано: 13 июн 2021
- OK here is how to never pay taxes….. if you’re already rich.
There are two types of taxes that you really want to avoid in countries like the US… income taxes and capital gains taxes.
Income taxes are easy to avoid… as a billionaire most of your wealth is tied up in company stock… your salary (…if you have one) is barely noticeable.
But selling off your shares to free up cash in order to buy mansions, jets, Pokemon cards, and super-yachts will incur capital gains taxes… soo you need to find a way to turn shares into cash without actually selling them.
Fortunately your friendly local banker will be more than happy to write you are loan using those shares as security at record low interest rates…. and tada, you have money to spend that you didn’t need to pay tax on.
The new York times recently reported that over 2.7 trillion dollars in wealth was stored this way, with not a dime of tax paid on it.
So congratulations mystery internet billionaire, and for more hot tips like this, make sure to like and subscribe to keep on learning how money works.
#HowMoneyWorks #Shorts #tax
___________________________________________________________________________
Link To The Capitalists Discord where I hang out with other creators - / discord
![Roddy Ricch - 911 [Official Music Video]](http://i.ytimg.com/vi/5N3lAfydeWs/mqdefault.jpg)
![ian - Fit Check (Feat. VonOff1700) [Official Music Video]](http://i.ytimg.com/vi/sDGWDBg45Dw/mqdefault.jpg)
“If you’re already rich”
Me: “Ight imma head out”
Lmao
Just listen
This one is true n real game
Being poor is expensive.
Precisely
No, being middle class is expensive. Your taxed to hell on the way up. Most poor people pay little to no taxes.
@@basketballnoobie8436 the poor get taxed a lot by society even though there are some government handouts
@@basketballnoobie8436 well what would they pay more taxes with? People I think, do not realize they are poor because maybe they have a house with a mortgage. If you can't pay off or sell your house and have money to rent for a few years, I'd argue you're poor. This is because at any given time you could lose your job and ability to pay your mortgage. In which case you foreclose and are homeless. To say nothing of the physical toll of being poor, which is realized in life expectancy.
Income correlates positively with lifespan.
@@justcommenting4981 you are correct for the most part. But one also has to acknowledge that some people are poor due to circumstances beyond their control (upbringing, health, yes perhaps even drive, motivation and family support that others benefit from). That is the part that is hard to accept in life, the huge swathes of gray between the easy black and white answers.
Now I just need to find an investment banker to underwrite a loan against my PSA 8 Charizard
You completely misunderstood the basics of how asset based lending works... you have to pay the loan back.... (at which point you sell shares & pay capital gains).
I actually have a very good understanding of how ABLs work. Of course you have to pay back the loan. But (being in the business), JP Morgan’s private banking division is going to be very friendly on Bezos violating any personal covenants if they’re also competing to underwrite a loan to his company.
Also, the real cost of all of this (interest rate + long term cap gains tax after liquidating to pay down principal) is going to be SIGNIFICANTLY less than what he’d pay in income tax + cap gains tax if he liquidated shares… especially considering the cost of equity for a company like Amazon
You could collateralize it as an NFT. And take a 1% interest loan against it. Just saying
So, the point of doing this with an asset is so that if your asset continues to grow in value like a crypto or stock. You arent robbed of the gains that would have accrued.
So i got bitcoin 12 yrs ago for 5 cents each. About 10k spent. And i needed money for rent. Bur i knew this would be big. So i take out a 15 yr loan at 3%. To get me outta this hump.
Now instead of cashing in that bitcoin. Bam. I got like 2 billion.
Though this wont work with a charizard as well.
@@Badname2011 what's a charizard??
I ran some numbers (please double-check my numbers because I may be wrong). A $1 million loan only cost $3333 in interest per month (for a 10-year personal loan at 4%). That means a rich person would only need to sell about $40k in stock per year to pay the interest on that million dollars (and leave the principal intact). They'd be paying 15% capital gains on 40k = $6,000 taxes per year. So, in exchange for $6k out of pocket on taxes, they get access to $1 million to spend. No wonder why they do this!!!
Even if they paid the principal + interest each month ($10,124), that would still only cost them $18,223 in yearly capital gains tax on the stock they'd need to sell ($121,000 per year).
Precisely
But when they pay it back, they have to sell their stocks in order to have cash to pay back. So they have to pay capital gains tax. Or can they give the bank the stocks?
They do have to pay cap gains. But if your Bezos, you could never pay it off if (theoretically) your stock continues to grow 10% per year, the amount your borrow + interest is less than that amount. But again, that assumes stock growth into eternity which is a lofty assumption. So yes, you’d have to liquidate and pay cap agains eventually!
Thanks for watching :)
@@HowMoneyWorks So they basically share the difference? Sounds like something rich people would do. Thanks for the quick answer, i guess a sub goes out
Actually a lot of people with old money just end up leaving the money to their heirs, who ar the moment don't have to pay capital gains. The debt can be settled at that point.
@@HowMoneyWorks Why not simply default on the loan. Bank gets the stock you wanted to sell in the first place, everyone is happy. Except for the taxman, of course.
@@OriginalKKB Because giving your shares to the bank attracts the same capital gains rate.
IRS doesn't differentiate between giving your stock and selling it. Both are same
Imagine if every company started paying their workers in stock. I'm sure CGT discounts would be removed by the government ASAP.
It is not the "government" (the executive branch) that sets tax policy, but rather it is the legislative branch (congress). Don't support politicians who focus their tax policy to benefit the wealthy, and the IRS will follow the new legislation. The difficulty of course is finding the appropriate politicians and convincing everyone that removing the CGT discount, home mortgage deductions, etc. is a good idea.
Honestly capital gains tax is stupid. Just because value went up (something that's a natural part of the march of time if the property isn't allowed to deteriorate) you owe taxes on it when you pull the value out of it?
Why even sell at all, just buy tangible assets and milk them for their value instead.
They do pay their employees with stocks but reserved only for top guys
@@felipeignaciogodoyfulle6659 you missed my point.
I don't believe in Capital Gains tax at all.
If you bought a house, rented it to tenants for 20 years and sold it off for an 800,000 gain that's between you and the fence post.
Yes we know that already. It’s sickening. Pooor Jeff besos, as far as the government taxman is concerned he makes a lot lesss money than a school teacher.
Lol "sickening" yea okay
Guess Bezo’s teacher was stupid for teaching him instead of learning from him.
@@influentia1patterns I'm sure if that teacher has any morals, then he/she is not proud of his money/cheating/business practices. 100 billion richer from the pandemic, but "threatened" by his workers bathroom breaks.
@@yeanah2571 why would you willingly display your ignorance on purpose like that?
@@influentia1patterns Were there any inaccuracies? Am I a fibber? Set me straight then, Chief
I've read about this before and I've yet to see an answer to why paying back a bank with interest is better than paying taxes. You're still losing money. Wasn't "not paying money" the point?
Would you rather pay 35% income tax or 5% interest? That’s how to distinguish it
I’m pretty sure the interest for these people hangs at about 2%, simply because the loans are extremely low risk
Ah.
The interest they pay is deductible to 100% . A 5% reduction on the Capitol gain velocity loan actuality creates a negative income incident.
@@unitedstatesdale, what is the English translation of that?
Also love that art……. I mean donation that happen to appreciate in value.
That's the worst. The IRS really needs to go after this practice
Ah yes let's incentivize the ppl that are hiring to move and cut tax obligations to the us entirely instead.
It is sad, how few wealthy people feel that they should pay their fair share. Most are so concerned about accumulating more wealth that they don't think they should pay their fair share to the country that allowed them to become rich. And naturally, the wealthy are the ones making laws, or influencing those who do.
You could also incorporate and get a 501c3 and as CEO dictate your own salary and take no salary but not pay taxes on anything you purchase and purchase it all through the non-profit donate your salary to the non-profit you donate your profits to the non-profit and now you're not paying income tax on anything and yet everything you buy you don't pay tax on so that's also way of doing it
How do you pay off the loan without income (and the tax that comes with it)?
Assuming the collateral appreciates in value they could just keep refinancing before the loan matures to keep borrowing against it. That’s how wealthy families who have owned prime real estate for many generations in major cities do it.
I am wondering the same thing. Because isn’t that a personal loan that you have to start making payments on right away?
@@AlmostHeroesFFXIV but how? you still need to pay that loan
@@deskejtx6211 Some platforms (like Celsius) allow you to only pay back loan interest each month and hold off the principal balance for the last payment. So if you put up enough collateral and take out a $1M loan at 1% APR your monthly interest payment is roughly $833. So theoretically you could use the borrowed funds to pay back loan interest assuming you didn't spend it all and then towards the end of the loan terms just refinance the loan and take out more money assuming your collateral has appreciated. Most of the time the people using these loans have multiple income streams to pay monthly interest/principal. They just use the loan to avoid selling an appreciating asset and avoid capital gains tax.
@@AlmostHeroesFFXIV i get it, thanks
Use defi like Aave or somethint. Catch up to the times youngin.
Stop the alpha ser
Time to abolish income tax. Tax spending. More you spend the more you pay, billionaires can't escape that
love how the article showed elon musk even though he is currently paying over 11 billion in taxes
So, what money do they use to pay back the bank loans? Or do they just hold that debt in perpetuity?
Usually they don't have a deadline for paying back the debt. Great for the bank (keep maturing interests) and for the billionaires (they can hold all of their appreciating shares and make more money).
@@apc9714, and I assume they can do this multiple times and multiple banks and no one along the line will care that these debts are not being repaid?
@@racewiththefalcons1 Not really. Bank want to be safe, so billionaires will have to provide a lot of shares as collateral. As long as they have enough "free" shares they can take on new loans.
Hold the dept till your kids inherit. They are not taxed when they sell. They can settle and continue the cycle.
@@taptoepat Dept??
In order to pay this loan you would have to pay taxes, though. Right?
I am pretty sure they will pay the loan first before the tax cut.
www.nerdwallet.com/article/small-business/business-loan-interest-tax-deduction
They just get another loan, and use that loan to pay the first loan when it comes due.
Let you kids pay it back. Thens its untaxed.
Just borrow at 1%, use 80% of it to invest and earn 5%, and borrow against that at 1% and repeat. Debt grows, so does net worth. I think Debt isn’t taxed.
Classed as tax evasion in the UK
It's not trillions hidden like this , it's quardrillions
Youre probably right
Buddy, the US annual budget is 4 trillion.
I really doubt there’s quadrillions of dollars out there.
@@capncook2006 GDP is 22 trillion
@@1495978707 22 trillion is nowhere near a quadrillion.
But wait, don’t you have to pay interest on this loan? And doesn’t that add up?
Yes you pay interest, but this is typically very low as the risk is low, so say 1% and in theory, your investments should be increasing more than this 1% in value each year, so in theory your investments are always growing quicker than your loan is.
The interest is less than the taxes. And if you can borrow at 1% and use 80% of what you borrow to earn 5%… lolololol
I still don't see the point of paying taxes to the federal reserve, especially when I'm not properly represented in Congress now.
Because they own you
If you refuse to file taxes you are arrested, if you resist you are shot.
Realistically they do have to liquidate and pay back the loans as some point (assuming non-infinite growth of stock), encurring some capital gains tax. But the idea is to defer this as much as possible because you believe your stock will grow in the future, but if your stock rapidly drops you will be liquidated by the banks. The issue is these people have literal teams doing their finances for them and making sure it's as efficent as possible and dodging the max amount of tax as possible legally. and regulation is a lagging indicator, you fix one issue with a law and they just quickly find anouther loop hole.
Why do i know all of these tips already, even though im broke as a hobo ?
Are these common knowlege ?
Cause your on your way to riches
Really? There is sooooo much more that goes into this. The basics are, it's more favorable to keep your money in a business to save on taxes, because there are more write offs and it uses income earned after expenses. Long term capital gains are the best taxes for individuals. They aren't much. That's why rich people don't day trade.
The rich get richer. They know all the tricks which helps them keep control of the money.
The rich stay “poor” on paper. Therefore no taxes. They give up control of money and wealth in exchange for holding companies and trust funds or whatever.
Or you could use DEFI lending platforms to basically do the same thing by borrowing against your crypto as collateral.
Even Celsius lets you borrow 25% of your Bitcoin with 1% interest rates
Very rich don’t pay taxes. They pay interest rate. Low ones at that.
Iirc you can avoid paying tax on long term capital gains up to $40k a year.
Borrowing money from a bank you still have to pay high interest. Elon musk took a loan from Goldman Sachs and the interest rate was very high. The reason why the rich don't want to sell shares in their company is because they believe in the company. Other shareholders will start selling stock if the CEO and founder start selling their own shares.
It's called never using your own money in theory it kind if like credit cards with low interest rates!
If you earn that much money and do not pay your taxes, you should be in jail...
You need to pay interest on that loan and have an income to pay that interest. In the end you will pay more because of the interest. However, it is still better than selling assets or income tax because you will be able to invest that money to have a higher rate of return than the interest. However, you still won't dodge taxes.
As long as you are alive, and have a high enough net worth, you can keep getting loans against other assets. You can then use those loans to pay the interest on the loans you already have, and any other expenses you have, and continue that until you die.
However once you die I believe your estate will have to sell assets to cover all of those loans, but the tax rate for living people versus estates is generally different.
@@bolt5564 you can also sell assets until the day you die. This strategy assumes a bullish return on those assets that is higher than the interest on the loan combined with the tax your pay to sell assets to cover that interest. I think it's a good strategy for the high net worth individuals, but may not be great for the average Joe and Jane. High net worth individuals have access to better apr and investments the average person can't afford
And how the banks withdraw the money from the stocks securities? They will pay taxes when "materialising" the stocks for currency ?
Incorrect. If they are gifted (or paid) with stocks they can exchange them for cash at the value they currently are. They would not pay taxes for this. The tax is when the initial owner of the stocks gives them or pays with them after the value has gone up during their possession. When ownership changes, those gains are realized.
@@braceyourselvesfortruth2492 in EU there is capital gains income tax which is from 0 to 35% in some countries.
In my country this is stiff 19%, and you pay this even if diffrence between first and second asset is 1$ you still pay 0,19$ in taxes.
Even if you receive gift as a stock you will need to pay taxes according to three diffrent groups you as a receiver to giver are:
I. family, wife/husband, kids, parents, step parents
II. uncles, aunts,
III. others
I think there is needed some pretty smart tax advisor on how to make those contracts legal and tax free, or do this under more freedom like country laws.
@@braceyourselvesfortruth2492 PS: But there are two methods I do as an owner of private limited liability company do.
- company give me a loan on for example 1% with maturity day 6 months
- on maturity day i take another loan from company on 1% and pay out earlier 1% of previous loan
- write it on the books and keep this perpetual loan to the rest of my life
second option:
- paying myself as a chairman percentage/commision of companies income. They are as i know taxed 0% because this is like i am salaried as for example car dealer which sell car
Debt is a short position on the dollar (or whatever its denominated). One day there could/will be an epic short squeeze; just like the late 1920s.
Thank you! 🙌🏻
Rich people are tax evaders
Collateral Loans, not only for the rich
How do they get the money to pay back to loans? and what's the usual length of the loans?
Those two types of taxes are both income taxes . . . And anyone can take a loan using their assets as collateral it’s not something exclusively done by the rich. . .
A regular person doesn't get an ultra-low interest rate. That changes the entire game. Taking out a loan at 8% interest rate vs a 1% interest rate makes all the difference.
You r the best channel I follow
The rich will always find a way out.
This is so simple to stop. TAX money from ANY loan secured with in investments of any kind that are not physical property for example secured by stocks, bonds, etc anything that isn't physical property such as a house a building etc. And have a cap on how much money per year can be borrowed without showing an actual annual taxable income.
Wouldn't that hurt old retired people who are already mostly poor to begin with?
@@MykdaBEAST not at all. I'm saying if you are using stocks or bonds to secure a loan of 250k or higher then make them pay the penalty they would originally pay if they withdrawn or cashed it in instead of holding the stock buying the home and paying NO penalty at all. When they do that crap their stock stays in place and is allowed to gain more and more capital. So tax them the amount they'd have paid if they'd have cashed them in like anyone buying ab$159,900 home would have had to do since they don't have endless control over the banks nor would banks just give them the money and let them keep the stocks or bonds a regular Joe would have to sell off the stocks or cash in the bonds and pay the bank upon closing or take out a mortgage at the interest rates anyone else would pay in order i
@@samanthalyons5055 Sure but you're picturing a scenario where the only reason anyone would ever borrow money is to be tax efficient. What if your house is on the line, or you need to pay off a major medical bill? What if after taking out the loan in the first place you're unable to pay it back? Now you're out of work or out of home or out physically injured, you took out a loan but you had to pay half that loan to the government so now you can't pay the loan back because you still need to make half the money back, then when you default on the loan you get taxed again because that's a taxable event. Get rekt old people, hope you enjoy homelessness lol.
Good tip. I will follow your advise when I become a billionaire.
Great video
Thanks Nadeem!
Where do you get the loan payback amounts of money from? Then sell stocks?
Give the stock to your kids. Using the carried interest loophole they would not pay any tax when selling the stock. Then they/you can pay back the measly 1% interest rate with the actual interest you gained from holding assets worth the loan amount.
Elon doing this. Haha
But there's a tax on capital gains. Most rich people pay long-term capital gains. I bet you don't know what the first $40,000 has for a tax rate. And everything after that is only 15%.
So basically you keep borrowing.
Thanks for that
America is great...if you're rich.
How do they come up with cash to pay for the loan's payment?
There are supposed a tax on these loans, or minimum rate of 20%.
How do you ultimately distinct these tax evasion tactics from legitimate loans?
@@tomlxyz what do you mean? These all are legitimate loans. If you really wants to distinguish them, it’s tough work. The best solution is not taxing the loan, but to tax the assets. It’s ridiculous to have 100 billion trillion GDP and got only 100 millions from the ones holding 90% of all the wealth, whatever the more accurate numbers are. And this wealth tax should be the only tax directly put on citizens. It’s more than enough to fund literally everything we have in our current broken system and have leftovers. But unfortunately, not even the government won’t implement this tax but also officers don’t even do their jobs to enforce this tax, although this is the only tax law we need.
@@LittleRadicalThinker mind blowing
@@victorbruce3315 What? I didn't say asset tax of 20%.
@@LittleRadicalThinker what's even more ridiculous is the loopholes and complexity of the tax code.
Just make it a flat 15-20% of all earnings for all people and be done with it.
So they will have to pay back the money to the bank with interests, isn't it?
So how will you pay back without selling your stock.?
What about private corporate owners?
how do you pay the loan back, as wouldnt u need to either pay urself an income or sell stocks to get the fiat to payback the loan? hence income tax or cgt?
This should be illegal 🙄🙄 imagine rich people actually pay their share of tax. And there you go. Free healthcare.
Please share more tax info. Thanks
Interesting how debt doesn’t get taxed
How do they pay back their lines of credit without getting taxed?
Guess this is WWhy sales tax has gone up so much in my state? But middle class beating brunt of burden while being exploited. "Just find another job." YEAH WHY DIDNT ANYONE EVER THINK OF THAT BEFORE, SHERLOCK???!!!!
No worries the common folks will cover it
And yet Elon Musk is paying 11 billion in taxes
Good interest to. I pay 0,89%
I dont see how taking out a loan against an asset and then paying the loan back is an increase in income... your not gaining anything. If i take out a loan against my boat for $50,000 and i have to pay back to the bank $50,000 plus interest im not gaining any cash by doing this
Unless your boat goes up 10% a year and you can buy more boats with the proceeds and you only have to pay 1% interest on the debt.
This is just so stupid. In germany my taxes go to something, even if its a measly 400 euro but they just sitting on trillions that could do so fkn mutch
On one hand, yes, the resources they expend on luxury could be put to better use.
But on the other hand, the vast majority of their wealth is tied up in a company doing something, and trying to "do something" with that money will have ripple effects. For example if they tried to feed the starving, the almost hungry will become hungry because food prices go up. If they bought houses for the poor then the price of housing would go up and other people are priced out of housing.
Okay but doesn't that loan incur a huge amount of interest in the long term?
Nope. The rich are able to borrow money at very low rates.
@@DrMattHH thanks
So how do they pay down the loans when they don’t have a real “income”
Where do they get the cash to pay for it?
I never understood this. Even if I am taking a loan to buy stuff, eventually I would still need to sell off my shares to actually pay back the loan which will get the capital gains taxes.
Thoughts?
One of the ways is .... Don’t sell, just die.
You can’t take it with you, but you can pass it on in your will. Typically the cost basis of investments is adjusted at the date of death, meaning minimal taxable gains when inheritors sell the stock at or near the day-of-death price.
Source: www.msn.com/en-us/money/topstocks/heres-how-to-avoid-the-capital-gains-tax-on-stocks/ar-BB1fWXZ0
@@calvinskim True. That is valid. But the question comes how do I "pay back the loan" without selling the assets.
@@tekkie_ another point is inflation+growth.
You take the loan now, get the money to buy what you want now, and then over the course of the loan payback period the value of the loan gradually goes down while the value of your assets goes up.
Overall, by the end of the loan you might only need to sell 80% of the shares to cover the payments vs the number it would have required to make the purchase outright.
The idea is that your investment portfolio grows in value much faster than the interest on the loan. These types of loans come with insanely low interest rates (like, 1-2%) because the banks feel secure that the recipient is rich enough to pay it back. Meanwhile, their investment portfolios increase in value by 10% or more every year.
So, in 10 years time, you owe maybe 22% of accrued interest, but your net worth is now 2.6x higher than it was when you took the loan out.
It’s not about never paying that tax, it’s about paying that tax at a later date, which allows you to live luxuriously while still keeping as much of your wealth as possible in appreciating assets that will make you richer in the future.
You are correct.
Loan is still a Loan even a 0% interest rate. Meaning you either have to give it back, or sell the shares to the bank. You cannot keep selling as you loose ownership. So break it down properly... whats the deal?
This is somewhat misleading. Most banks set the minimum collateral at 250k for a personal loan secured against an external account. This is a lot of money, but if you save and invest responsibly it isnt a hard level to reach. If you have that much money (really any amount, but the more the better) invested you can also sell stocks tactically to generate capital loss without actually losing money. This will grow your account quicker, but you will have to pay more taxes if you ever liquidate that money. Combining those two stratigies means a pretty high amount of leverage without ruining your credit, or riskier investments.
Question
Unless you feel a stock is declining and not worth keeping your money in, why is it better to sell at a loss (to null some taxes) rather than keep it to sell at a profit later?
Is some tax savings really worth the loss? It's a deduction (reducing taxable income) rather than a tax credit after all.
So yeah, something to take advantage of when you need to pull out of a declining stock... But is it ever worth doing on purpose?
@@priestesslucy3299 Good question. The idea is to generate many small losses, and reinvest in assets tailored more to the current market. The tax losses allow you to add more principal (from your tax savings) in the short term for more capital gain long term. The taxes catch up eventually, but it allows you to hold off on paying them. This is similar to why wealthy families still pay a mortgage on a house they can afford to pay off. If you can beat the interest rate, you should defer paying off some debt for more profitable investments. Utilizing the tax losses this way essentially means a zero interest loan for the amount you have saved in taxes.
@@priestesslucy3299 a good example: I just put $2000 or so into my portfolio. Yesterday. Of the 10 or 12 ETFs I invest in, one lost value yesterday while the others gained. If I sold that one at a $50 loss, I can re-invest in one of the other ones that has been outperforming it. Doing this several times a year helps the tax savings add up, though you may have to very slightly sacrifice in regard to diversification.
@@alech9418 based on your example it sounds like my supposition was correct, it's a side benefit to grab while adjusting the portfolio for greater profits than anything to deliberately pursue.
@@priestesslucy3299 Mostly yes. There are some companies which aim for it. There is one company near me that advertizes their goal is to beat the s&p while generating tax losses equal to 10% of your portfolio, but it is a rare strategy that only applies to the uber rich.
What's the point in doing this? I get that you can live off the loan, but when the payment for the loan is due you have to sell your stock and pay cap gains. Why not just sell stock in the first place? Like I get it defers it to later, but isn't the overall cost higher because of the cap gains and the interest payment?
So you can pay low interest today which suggests your cost of debt is like 5%… orrr you could sell equity which (for Amazon) is expected to grow YoY 15% - 20%… why would Bezos want to sell NOW when he can pay off that loan with fewer shares in the future?
@@HowMoneyWorks Ah that makes sense. This process seems like a win-win-win. Bezos gets to have larger returns through share growth than he would by selling them now, banks get to give out really safe loans, and the public still gets the cap gains eventually (and at a higher real value as well because even by deferring them the loan interest will outpace inflation so in the end the total cap-gain tax in dollar amounts will be higher even if Bezos needs to sell fewer shares to cover it). Am I getting this right? This seems like a fine system. Why are people so angry about it?
This is absolutely right. Here’s where the criticism happens:
First, if Bezos equity increases by $400M in a given year but he only used $3M personally from his loan, he only has liquidate whatever low interest/principal he’s paying (his personal income may be sufficient for this actually). So, people will argue that he’s not paying his fair share of taxes because liquidating that could mean more tax $… so really comes down to your opinion on unrealized cap gains taxes.
Here’s another issue: you pay capital gains tax in the jurisdiction in which you (or say a holding company) resides even if it’s the purchase of US public equity. So, I can set up a holding co in a foreign jurisdiction (hate to be cliche but let’s say the Cayman Islands), and then take a loan against those shares which have the same value. But when I liquidate, I don’t have to pay a US tax.
@@HowMoneyWorks For the Cayman Islands example, isn't it the case that if you are paying personal cap-gains then you'd have to be a resident of their (which afaik Bezos, Gates, Musk, etc aren't so they'd still be paying US taxes for personal cap-gains)? And for business expenses with shell companies, doesn't the IRS (at least theoretically) count that as tax evasion if you are putting personal expenditures as company purchases. It's kind of an orthogonal issue anyway, and it seems like enforcement of current tax law is the only real problem then
The example about the Cayman Islands is more for someone like... let's say Warren Buffett. Unlike Bezos and Musk, his job is to buy shares of other companies through his company (think Berkshire). Let's say he locates his company in the Caymans and buys shares of US stocks. He is then awarded stock options, which is really a representation of the value of his company, which is the value of the shares his company holds....
SO... he can just rely on the value of those shares in his company going up, never sell them, keep buying them, and then take a loan against stock options that Berkshire might have.
I'm an investment banker and not a tax attorney, so don't take my exact word for it. But I've heard through the grapevine (through a few sources) that this is exactly what Mitt Romney does with his family office.
Exactly!!!
The risk is if the stock falls ya acrewed
This makes no sense for where will the money come from to pay on that spending cash loan?
as the shares become worth more and more you can keep on extending the loan. Normally these types of loans have interest rates of 1-2% whereas stock returns tend to average about 8% over time.
What if shares crash? Sounds precarious to me. If it works for them, fine, but not how I want to wake up in the morning...
FYI: Acts 2:38 Acts 22:16 Mark 16:16 Revelation 1:5 Hebrews 9:17*
@@HowMoneyWorks Wouldnt the 6-7% difference between stock interest and loan interest be offset by sales tax? Are we specifically describing using loans to hoard capital, making gains on the difference but not actually spending in significant ways?
And how do they pay those loans?
You don't have to be rich for this, but you do need to be able to save money.
how much money do you need?
@@user-ge5oe9oo2kIn order to borrow against an asset? Depends on the asset. You can have $1 worth of bitcoin and borrow 50 cents against it if you want. You can take out a loan against 1 bitcoin and buy a house. Similarly if you invest in stocks you can take out a loan against your portfolio.
Taxes are voluntary.
That's how I t was done. 🙄
Ok so if you never sell your stocks then how do you payback that loan ?
Even I'm confused here
OK but like how do you close that loan lol
when i listen to you why do i feel like im being rained on?
Thanks
What you really do is get your company to loan you money and forgive the loan. That's the 200 IQ play.
🤣🤣 yeeeap
A forgiven loan is considered a deemed disposal triggering CGT.
Thanks cause i just happen to be a billionaire.
So who is lending out billions of dollars at low interest? Cmon don't be so gullible. Banks want a return, so personal loans come with interest. This interest is not tax deductible unless you use it to earn income. So let me get this straight.... your advice is to incur interest instead of paying taxes which you will have to pay one day anyway??
How do you pay off the loan without an income or selling stocks?
I don't get it either, they skipped something somewhere.
But then how do they pay the loan back without paying taxes
Such a rigged system
How do they make their monthly payments if they’re making a shitty salary they can’t touch their fucking stock? what the fuck are they using to pay back the fucking monthly payments? what the fuck
Or ask your company to buy you a Yacht.
We need propiety taxes
But how do you pay back the loan
I do this with defi crypto loans
So if you're rich buy it with credit 🙄🤔
This is all BS. The poor people pay the least amount of taxes. 1% of a 10^6= 10K, where 10% of 60K is 6K. And this is an exaggeration. The richer you get the more percent you pay on the more money you make. These commercials are from the government wanting you to become richer so you pay more taxes.
Wouldn't they still have to pay interest on the loan?
Then we need to put a stop to this.
Im So sick of the wealthy.
We’re all historically wealthy compared to generations before us. Stopping wealth is stupid, but if you want destroy all technology.
We can all be cavemen. Grunt… wealthiest person then becomes the person with the biggest club.
God bless America.
Being an indian, this wouldn't work lol