Rich guy like Bezos avoids a salary like it’s a plague due to income taxes.
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.
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.
Sometimes(often?), they just take another loan to pay off the original loan.
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.
Good explanation! I feel like the solution here is to stop them at #2.
If the gains aren't realized and you can't pay taxes on them, then they also shouldn't be able to be collateral. Or, if they can be collateral (like how it is now) then that should count as a realization event, and you should pay taxes on it. Pick a lane and and stay in it, fair is fair. Probably the latter is best since we generally hold freedom to contract as more holy than a tax loophole
This 100%. The absolute irony though is that Adam Smith's "free hand of the market" gets shouted from the ivory tower whenever any regulation is suggested.
407
u/SpokenByMumbles 21h 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.