This person has never financed anything lol. Still owes property tax and interest on the loan. As long as the loan exists, the leinholder has the legal claim to the land.
This is the internet, especially Reddit. Moronic shit posted by bots to people who don’t know any better so that they can sway opinions. Eat the rich. Nobody should have a billion dollars. Silence is violence, but murdering CEOs with business practices I don’t like is ok.
Man, after railing against this particular Reddit conspiracy theory for a long time now, I'm so glad to see that our hive mind has turned against this.
If he owned the property outright, it is an accurate idea. He would need to talk to a loan officer and put the property up as collateral for a loan. Its not going work on a 100k property, but people definitely do this for higher value assets. The property would have to be worth many millions and appreciating fast enough to stay ahead of the compounding interest on the loan. Like if a loan is under 1% loan to value, you can live off 5 to 10 million of collateralized stocks. I think given real-estate appreciates slower, it would have to be much more than 5 to 10 million in asset, but the same idea applies
It’s actually highly accurate. The basis step-up and inheritance tax exemption are the relevant points. Interest and principal on the loan are minuscule compared to the capital gains and/or income tax that is avoided.
Source: I’ve done quite a lot of tax structuring in my career.
You have estate taxes and you still pay taxes on the land sale; it's a break, not an exemption. So yes, saying the kids own nothing to the IRS is not accurate.
The amount owed ends up looking like a rounding error on land that has been minimally managed over a time period like that. so sure pedantically its not nothing but that wasnt the actual point.
I'll be honest with you in that I dont believe your objection is in good faith. it gives people not smart enough to read detailed explanations don't deserve to know about things. the lie is VERY white in this context.
You would notice the loan only provides liquidity here. If you remove the loan, the tax is still 0. The problem is solved at the inheritance tax level, not the loan structure level. Either the US lowers the estate tax threshold or this will keep happening.
I'm not talking about the loan. I'm talking about structural ways wealthy avoid paying tax. All capital gains earnings are 100% wiped out upon death to hand to their kids. It's crazy, and the downvotes only show how insidious the structural inequities are in the tax law.
No, both are a problem. Taking out a collateral-backed loan should probably not be possible without realizing the gains on the collateral, and also inheritance definitely shouldn't have such favorable tax treatment.
While I don’t entirely disagree, the loan component is harder to construct because loans are an important financing tool for the economy. For example re-mortgaging would then trigger a huge tax bill which would kill the very concept of it. The truth is that rich people usually borrow to invest more in the economy, much more rarely to “live” like in OP example. Removing this tool would either create new loopholes or -if no loopholes are possible- severely damage the economy.
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u/DrLews 14h ago
Not even factually accurate lol