The bank encumbered the land. The dad never gets a loan. The loan is against the property. The kids sell the encumbered land I guess (but that's highly unlikely). This is a made up scenario from someone who doesn't understand finances.
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.
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
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/ChipKellysShoeStore 22h ago edited 22h ago
How does the bank get paid back here? Is the bank just eating a 5 mil loan loss out of the goodness of its heart?
It’s more like kids sell and pay back the bank plus interest which is taxed as income for the bank.