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by Aloisius
568 days ago
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I gave example for a $10 million line of credit. The assets required for that it is $50 million. For goodness sake, the interbank rate right now is 4.8%. No one is getting close to that no matter how much they are worth. Someone like Mark Zuckerberg does not need this for anything but short-term cash - where you don't want to, or can't do to trading rules, liquidate assets immediately or all at once. Instead you get a loan, sell assets slowly to cover it and repay it as quickly as you can. The idea that someone in their 40s is living off debt as a capital gains tax avoidance strategy frankly sounds like someone has mistaken a financial services advertisement for a sound strategy. |
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These types of loans are absolutely used as part of tax avoidance strategies employed by net worth individuals of a certain asset class. It is unlikely anyone on HN is doing this successfully if at all. As I repeatedly indicated it’s used successfully by people in a certain asset class, and it’s part of a broader strategy regarding how wealth is managed for the individuals that are able to take advantage of this.
I also linked several articles on how these things work, here’s another that talks about the tax loophole specifically: https://equitablegrowth.org/closing-the-billionaire-borrowin...
I did not say it’s the only way people live off their wealth though. That is something I never stated or indicated
Now as far as the rates go I wish I could find the article that that talks about it from earlier this year, but yeah if you really are super high net worth you aren’t paying 7%, but even if we take that off the table for the sake of argument, if you expect to net more than interest paid by a significant enough margin the loans still make sense, and for the class of folks I’m talking about they will almost always be able to outpace the rate by a significant margin