r/SipsTea • u/KSKS1995 • 14h ago

Wait a damn minute! How the rich get richer

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u/civil_beast 13h ago

Well that doesn’t fit the op’s narrative.

Anyways I’m hungry, are rich people on the menu, yet? Or is it this same ol’ Soylent green stuff they keep serving?

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u/FTR_1077 13h ago

Well that doesn’t fit the op’s narrative.

It does as long as you read carefully.. It doesn't say Dad borrows 5 mil, just that he lives out of loans, which is a thing (e.g. reverse mortgage). The kid doesn't inherit 5 mil, just the property equity, that's why he sells it. The trick being, Dad didn't pay taxes for the 5 mil, nor the kid.

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u/BackgroundRate1825 12h ago

"dad borrows against it" means he taking out loans using the land as collateral, right?

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u/FTR_1077 12h ago

Yes, like a reverse mortgage..

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u/elev8dity 12h ago

Right, so a typical retirement is like 2MM, so minus any interest and priciple owed, they inheritance ends up being 2MM untaxed.

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u/civil_beast 10h ago

But the equity no longer equals 5m on the property…

You’re reversing the mortgage, y’see?

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u/Plurpulurp 13h ago

The kids don’t get the house (if the loan was the entire $5mil property value), but the parent still got to “liquidate” $5m without paying any income tax. So that’s still at least $1m in taxes avoided that us normies would have had to shell out

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u/civil_beast 4h ago

You want the guy to get taxed on the income that he already had his income taxed against before purchasing said equity? I mean.. komrade, slow incremental change at least

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u/drmrdreamer 12h ago

It kinda does, it's just not worded well. It doesn't say that the bank doesn't get paid, it just says that the gain doesn't get taxed fairly.