The “Buy, Borrow, Die” tax loophole strategy is explained very well in this video.



Cliffs

- you can be broke one day and become a multi billionaire spending lavishly on all the toys of the rich and yet never pay a cent in Income tax due to this scheme

- if you happen to have a company with good equity value you instead just take a low interest loan(s) at the bank against it and use that cash to live off. You keep increasing and rolling that loan until you die just paying interest and never paying any income tax as the money forwarded does not count as Income

- the idea is that one day you will pay capital gains on that stock to make up for the lack of income tax you paid

HOWEVER

- when you die those who inherit your stock get a reset on it (so Elon's kid could sell on Day 1 a couple Billion in stock and pay no taxes on it) and then retire any low interest debt you had in your estate.


The govt gets no Capital gains on that that stock that Elon held and utilized as Income his entire life and they got no Income tax from him. He out flanked them in both directions.

By simply changing the system to require the loans be declared as Income if you are, in fact using them as Income this issue would be resolved.



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So I am curious if anyone, perhaps Inso from a generally Right leaning perspective or Original Position or ecriture d'adulte from a typically more Establishment Dem, anti Progressive standpoint will argue that this current structure is a good one??


Does anyone NOT see this as one of the most bald-faced ways rich people can buy favourable legislation and treatment from gov't such that even someone realizing Billions in wealth pays no Income tax while you will be thrown in jail if you don't pay on your earnings?

The accounting world needs a nice little shakeup. Gets some of these codgers out to pasture and make room for new blood with new tax avoidance ideas. I'm all for this cockamamie plan.

Let it burn.

I feel like I should qualify my above post by saying that I understand, and hope you do as well, that this is just a matter of them following the path of least resistance as far as tax avoidance goes. It's a simple method and falls within the rules of the game. Change the rules and it's not like they're just going to say, "Aw, shucks, I guess I'll just write you a check for a few billion dollars now" and call it a day.

It's like playing a cat and mouse game with the cartels.

Still, no reason not to try and revel in the mayhem it causes!

I'm sure you know this is a political game and the dems don't actually think it has legs. They don't expect that republicans will let it through. I'd be most entertained if it somehow did pass, and then the dems are forced to acknowledge the reality that all of Elon Musk's money still isn't enough to pay for everything they want. Next stop: "$100 million is way too much money!"

"$10 million is way too much money!"

...

"****"

So Elon Musk is going to hang some mayors from overpasses if he is taxed at the rate the Nordics tax their billionaires?

He'd squeal like a stuck pig if someone even touches him funny.

Oh, c'mon. Musk does far worse things than that on a daily basis. You must not be keeping up with the latest news from the mines.

Pffft. Pablo who? Get on Elon's level, cartels.

If the alternative is dying I'll happily pay my taxes thank you very much!

I don't support anything that enables people to evade taxes. I pay more than I am legally required to by law just to make sure I am doing my part while others do not. You can even donate to the IRS right off the website (Americans anyway). No excuse

I'm dumb but there are prolly some account/tax loopholes that need to be looked at or baind-aided.

Im not even talking about the person or business that makes 2-5 mill a year im talking about those that make 100+ mill a year,


I sometimes have ahard time to believe that bezoz, musk, etc those people are only like 2-3% liquid. that just doesn't make sense.

also insane that a small 100 employee business pays more in taxs than businesses quadruple that

Don't worry, this is probably not the case.

The internet memes are about corporations not paying income taxes because they're able to show a net loss on the books. This kicks the can down the road, but in the meantime they still pay a shitload of other taxes. Just not specifically corporate income taxes.

Of course, saying Amazon doesn't pay taxes makes for a better headline than "Amazon and its employees paid tens of billions of dollars in taxes last year, but none of them were specifically earmarked as corporate income tax!"

all employees pays tax, with or without working for amazon.
whats that got to do with anything ?

You are going to say but without amazon, those jobs would not exist ?
they probably would under another brand since amazon destroy a lot of them ...

https://www.marketwatch.com/story/am...did-2017-01-19

"But for retail workers, Amazon is a grave threat. Just ask the 10,100 workers who are losing their jobs at Macy’s. M, -2.74% Or the 4,000 at The Limited. Or the thousands of workers at Sears US:SHLD and Kmart, which just announced 150 stores will be closing. Or the 125,000 retail workers who’ve been laid off over the past two years."


All companies always paid taxes, why amazon should get a pass not to ?
the company and its owner do not do well enough ?

Fwiw , I’m sure the roads used by Amazon to receive and deliver goods is profitable for them .
Those roads, bridges , etc . Aren’t free …
The laws that protect Amazon stores have a cost as well .

Macy's pays minimum wage or close to it.

Amazon pays $15/hr to start.

I thought you were for the workers?

That is the greatest pro corporate no tax spin ever.

All companies and employees pay those same taxes Amazon does. That is an X=X scenario and thus not worth saying.

However Amazon specifically and a some other Corps like them, get away with paying no Corporate tax which is a difference and worthy of discussion.


Just as Elon paying other forms of tax (Consumption, etc) should not be used to suggest it is correct that he avoids all Income taxes, while drawing what is an obvious income, just by another name to avoid the taxes.

I think i read Elon has taken over $50 Billion in 'alternative Income' over the years that he uses to pay for his lavish life. Imagine not paying a cent of income tax on that, while a guy making $50k has to pay his max due.

I would bet Bezos uses the exact same tactic and probably paid for his new $500MM+ yacht that way.

You have access to these exact same tactics, just on a smaller scale, and your collateral isn't as attractive to an underwriter as shares of Amazon or Tesla. Call me crazy, but I'd prefer to not be charged income taxes on my mortgage and auto loans.

I skimmed so hard the first time I missed these gems.

Not all companies pay income taxes, because not all companies show a profit. In fact, many people have just created jobs for themselves, not actual businesses in the financial sense of the term.

Second, every dollar that flows through Amazon shopping carts is subject to sales tax. Their fleets are paying ungodly sums of money in gas taxes and other transportation-related fees. They specifically chose low tax areas for their distribution centers, but they aren't skipping out on property taxes, either.

As stated in the first post, Amazon also pays workers more than their competitors, so they're kicking in a higher share of payroll taxes as well.

Amazon pays plenty of taxes, you muppet. If they run a more efficient business than those they replaced, they'll end up paying more income tax in the long run. The growth phase of business makes it extremely easy to keep your income tax liability low. It also helps that local governments are so desperate for those other forms of income that they'll offer other tax incentives to offset corporate liabilities.

You may not agree with those officials that it's worth the investment, but it's not Amazon's fault for taking the offer.

That is not the issue.

The issue is why they would allow Income to be gamed like that when it is clearly income just by another gamed format.

Your position above would be like the gov't just saying 'all taxes on income above $1MM a year will now be zero' and you replying 'heh that is available to all of us. Sucks some of us just don't make the Million a year to take advantage of it'.



it is even more exploitive and obvious when it comes to the Capital Gains Reset on the stock they are borrowing against.

The Uber rich can avoid to hold Billions in Tesla, Amazon, etc and never cash a penny of it. Especially since they can borrow against it tax free. It the perfect 1, 2 punch of biased benefit.

They can then hand that stock off via their will and the kids receiving it get a reset, meaning all the prior capital gains are wiped out for taxation purposes.

How is that not a WTF?? decision within the tax policy.

Mark Zuckerberg gets all his stock at Zero cost base. It grows in value by Billions and Billions of dollars. He never sells a share and borrows against it tax free to live the Billionaires life style. And when his dies and his kids get it
they can sell it all for Billions and billions and not pay a cent in tax?


They are so rich they can do the same thing generation after generation. Just buy blue chip stocks and hold for their lifetime, borrow against but never sell and then pass the stock on in the Will. The next generation sells it all tax free and repeats the process.

You could not write the tax law more blatantly biased and with worse logic if tax fairness is at all a principle in the equation.

I know it's frustrating to get outplayed by people smarter than you, but it happens from time to time in a country based on freedom.

The step-up basis rule seems dumb to you because you're thinking about it one way, but imagine if it didn't exist. Estate taxes are a thing, and the government wants to levy that on the current value of an asset, not the cost basis of something held for decades.

There is no federal inheritance tax because double-taxation of two people on the same dollar is a dick move, so if the feds wants a piece of that pie, they need to get it from the estate. You want to have your cake and eat it, too.

Estates such as Musk’s are liable for estate taxes even on unrealized capital gains.

Then don't buy them with income. Use your capital gains monies.

"Sure, they paid their taxes, but it wasn't put in the box specifically marked as "capital gains tax" on the form. SCANDALOUS!"

Again, QP, you can take advantage of this in your own life. You might even be better off than Musk in this case, because the stocks you pass to your kids at the stepped-up basis are truly tax free up until $5 million dollars in total value.

You can probably also borrow against your multi-million dollar portfolio and use your social security check to pay the interest on the loans. Can't beat 'em? Join 'em!

This post would be adorable, if you weren't such a zealot.

Thanks for showing the class you still don't understand how this all works, though. It makes others more comfortable knowing they aren't alone.

Well, I have no problem paying as little tax as I can get away with. I'm sure the super rich feel the same. This issue, as you rightly point out, is that the rich have too much influence in getting the laws written to favor them.

That's pretty much why the US is on the brink of becoming a fascist, 3rd world banana republic. You just can't have a democracy when the majority of the voters aren't represented.

I don't understand how what works ?

Loans, apparently.

Curious why you think this when there are many ways to game it.

Who cares if it's a 'dick move'?