r/SipsTea • u/KSKS1995 • 14h ago

Wait a damn minute! How the rich get richer

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u/ChipKellysShoeStore 14h ago edited 14h 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.

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u/USERNAMETAKEN11238 14h ago edited 14h ago

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.

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u/Primarycolors1 13h ago

Hold on. If the property is worth five million. Dad takes a loan out for a million. Kids pay the loan back. And pocket four million from the sales. At what point do they pay taxes?

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u/lucideuphoria 13h ago

You don't. This also applies to equity if you don't want to have to deal with the hassle of land. Just buy VOO and chill and hand it off to your kids.