| HN Mirror

This is false in the US. Neither loans nor gifts of $1200 are taxed.

Also, loans don't evade the capital gains tax, they merely delay it. Stepped-up basis is what evades the capital gains tax.

HarryHirsch 1542 days ago

Yes, when your friend says it's a loan and you treat it appropiately on your tax return it's not taxed. Else it will be. And if you can delay capital gains tax, great for you! How do I delay income tax?

Wrong. If it's not a loan then it's a gift and that's not taxed either for $1,200 as I mentioned. No need to even report it if it's under $16,000 per year.

HarryHirsch 1542 days ago

Venmo will happily send you a 1099 form if it's above the 600 dollar threshold. We have Joe Biden to thank for that. It used to be higher.

vmception 1542 days ago

A form doesn’t mean a tax is due

It means a transaction was reported and that you better have a good story about why the tax isn’t due and why you didn’t report it on your own forms

The people that are worried about the venmo 1099 are the people that have not been doing a lot more under the table

(Not to invalidate the rest of the population that is just irrationally afraid of tax collectors)

I'm not sure that's true. They are only supposed to report on a 1099 if they know it's earned income, not just a transfer. If they're reporting mere transfers to the IRS, then that's a problem.

That said, based on personal experience, I don't think Venmo is sending 1099s to everyone above that cumulative amount. I do believe they categorize transfers based on personal or commercial use. I expect a 1099 to be issued only for the commercial transfers.

oh_sigh 1542 days ago

The 1099 is for sales of goods and services. Your friend loaning you $1200 is not a sale of a good or service.

onlyrealcuzzo 1542 days ago

The 1% aren't borrowing against stock - or if they are - it's minimal and not worth discussion.

99% of the borrowing is coming from people worth close to a billion or more (0.001%).

I have no idea if this is how they do it, but I imagine they somehow "mortgage" their shares, then use the money as their own. Any interest you pay on investments is tax deductible, so that would reduce their tax burden. Not to mention, most of it isn't taxed since they aren't realizing those gains.

Again, just me brainstorming loopholes.

The interest is only tax deductible if you reinvest the money, which essentially means you can't use it. If you use it for living expenses, to buy a lambo, etc, then no deduction for you. Also, the loan must eventually be repaid, which means selling the assets and paying the taxes. Only if you carry the loan and pay the non-tax-deductible interest all the way until you die, then the capital gains taxes get erased by stepped-up basis and your heirs pay off the loans without paying capital gains tax. So stepped-up basis is the loophole, not the fact that you can take loans.

Also, carrying ever-increasing loans (including loans to pay the interest on the previous loans) until you die means you pay a lot of interest! The "buy, borrow, die" strategy only works if you withdraw about 1% per year or less, otherwise the loan interest will catch up to you, and eventually you'll be at risk of losing everything to margin calls. Meanwhile if you withdraw normally without loans, then you can withdraw more like 4% per year indefinitely and have way more money to spend per year even after paying tax. So "buy, borrow, die" only works for huge fortunes where you didn't plan to withdraw more than 1% per year anyway. It's not something that most rich people are going to do. It severely limits your cash flow during your lifetime simply for the sake of saving taxes for your heirs.

The people complaining about these loans have no idea how it actually works.

"The people complaining about these loans have no idea how it actually works."

Not that I'm one complaining about the loans, but so you have a link to how it works?

I didn't mean they directly use it like that, which is why I mortgage in quotes. I thought there's a specific type of small corp the wealthy use to avoid/reduce taxes by going through a sort of conversion.

I explained how it works. Which part is unclear? How you get the loans? At the asset levels where you might consider the "buy, borrow, die" strategy, like $100m+, you can simply ask your banker or more likely your family office will do it for you.

Lol OK. How about a link then?

vmception 1542 days ago

You talk to an investment bank and ask

You can borrow against anything, if someone is willing to lend

Collateralized lending is the least constructive of all

Make it worth their while

oh_sigh 1542 days ago

I'd encourage you to actually research how any of this works, because you are extremely misinformed and parroting the same lines that I see repeated verbatim around the internet by other misinformed people(ie "Bezos can just borrow against stock he owns and never pay any taxes!").

Do you have a link or can give a brief explanation? How the loans work that you say we don't understand?

oh_sigh 1542 days ago

Not really, because I have no idea the extent of ignorance I'm dealing with.

A simple question would be - how does the loan ever get paid off?

A simple point would be that not paying taxes on loans is not some crazy loophole that only the rich have access to. Literally anyone who has ever taken out a mortgage for a house or a loan for a car has taken advantage of this - I'd guess at least 80% of adults in America have a car or home loan.

How about a link then? It seems like you're trolling or otherwise violating the spirit of HN. I mean calling us all ignorant and uninformed, telling us that we're all wrong, then not explaining how we're wrong. In fact, your second comment conflicts with your prior one (claiming that Bezos can't borrow against stock to avoid taxes, then claiming that's exactly what people do).

oh_sigh 1541 days ago

Here you go, enjoy: https://www.irs.gov/privacy-disclosure/tax-code-regulations-...

Who is "us all" I'm calling wrong? Are you part of a group of tax ignorant fellows with HarryHirsch? Is it a group of people who get their understanding of tax code from r/antiwork?

Delaying taxes is not the same as avoiding or evading them.