[bdangubic]

I see where you are going with this but you are changing parameters here. > For starters: loan with a covenant that governs further borrowing and requires you to instruct the lender if your marketable assets fall below a certain value.

You did not say anything like this, you said "What about presenting your brokerage statement as proof of assets to a mortgage banker?" - this is like me showing my bank account balance during speed dating to flex a bit :) Your example would be 1000000% taxed as you are obviously using it as realized gain.

> Next up: loan to heirs.

If you are using real money, loan all you want. If you are using "money" you are telling Uncle Sam you do not have then you pay tax before you borrow that.

> Next up: unsecured loans at preferential rates if you store your securities with the lender. (This is already a thing.)

This is up to the lender... If they want to use my skin color or my gender or my zipcode (all of which they do) they can also use other stuff as well

I get that I am oversimplifying this but surely a system can be put into place that prevents current madness :)

[JumpCrisscross]

> Your example would be 1000000% taxed as you are obviously using it as realized gain

How? There is nothing different from the Amex example.

In both cases I'm showing assets held elsewhere as proof that I'm rich. In neither case am I pledging anything. In both cases the letter of the contract requires me to notify the lender of material changes in my financial condition, and in both cases I get a favourable rate--sometimes equal to the pledged asset rate.

> is up to the lender

Yes, and they'd rationally replace secured loans to anyone with unsecured loans to the very rich which automatically accelerate on the borrower's death and carry on as usual. In the end, the behaviour stays the same: the rich let their stock appreciate while they borrow, personally, to fund spending, all the way until they die when the bases step up, they cover the loans and then the heirs get to do the same thing.

[bdangubic]

You are very convincing and have swayed my opinion on this issue for sure. I do not agree with a lot of it but good disagreements :)

> How? There is nothing different from the Amex example... In both cases I'm showing assets held elsewhere as proof that I'm rich.

but you are saying to Uncle Sam that you are not rich... so you are just a big fat liar here and your punishment should be cap gains taxation!!!!

> In the end, the behaviour stays the same: the rich let their stock appreciate while they borrow...

This is exactly what needs to be stopped except of course it won't be cause you know...

[JumpCrisscross]

> you are saying to Uncle Sam that you are not rich

No I'm not. I'm reporting all of those assets as held. They've gained in value, and if and when I sell them I'll pay tax on those gains. In the meantime, they're just sitting there. Appreciating unrealized. And making me look rich to potential lenders.

> exactly what needs to be stopped except of course it won't be cause you know

No, I don't.

I see an analogy with the corporate death penalty. It's an appealing but ultimately stupid concept. Yet it serves a rhetorical purpose: it distracts us from debating massive, debilitating fines. Divide and conqueer. Similarly, we eliminated the step-up basis partly in 1976 and completely in 1980, and then repealed the estate tax in 2010. Those--restoring either the estate tax or, at the very least, the carryover basis in some form--are the real policy wins.

(Likewise appreciated the discussion.)

[Qwertious]

>Divide and conqueer.

Heh.