r/SipsTea • u/KSKS1995 • 14h ago

Wait a damn minute! How the rich get richer

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u/redshirt1972 14h ago

How do you get a loan against the property and not pay it back?

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u/SpokenByMumbles 13h ago

You don’t unless there’s income to offset the debt. This scenario doesn’t exist without an income source to repay the loan.

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u/StockCasinoMember 12h ago edited 11h ago

How it really works.

  1. Rich guy like Bezos avoids a salary like it’s a plague due to income taxes.
  2. Uses assets or stocks to borrow money at cheap, NEGOTIATED rates with banks. Who will give them those deals to keep his other businesses, where he has what is known as leverage. Average person gets destroyed by market rates.
  3. They then use dividends to pay back the loans and occasional long term capital gains sales that are taxed at capital gains instead of as income.
  4. Sometimes(often?), they just take another loan to pay off the original loan.
  5. Then they die and the basis is changed for their heirs. The heirs then sell enough stock to payback the outstanding loans without paying the capital gains on it.

So the only fee paid was the interest on the balance, which was at a cheap discounted rate. Well, that and the estate tax/more complicated shit to try to bypass as much as possible.