[giantg2]

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.

[modeless]

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.

[giantg2]

"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.

[modeless]

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.

[giantg2]

Lol OK. How about a link then?

[modeless]

A link to what?

[giantg2]

A link to how the ultra wealthy access their money/stocks and reduce taxes.

[vmception]

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