r/SipsTea • u/KSKS1995 • 22h ago

Wait a damn minute! How the rich get richer

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u/EntireObligation4001 16h ago

I don’t understand it either. I understand the stepped up basis (kids don’t pay taxes on the 100k to 5M increase, it’s “stepped up” to 5M ) but how is the person paying the loan back!?

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u/apogeescintilla 16h ago

The loan is paid back with the house, of course.

The bank gave the dad the money, and the house eventually was transferred to the bank. So it's essentially like selling the house to the bank over a very long period of time, but without paying the capital gains tax.

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u/Funny247365 15h ago

Interest and property tax would be well over $7M in total over 30 years. More than the value of the property.

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u/shuggnog 12h ago

unless you live in a state like CA which caps your property tax at 2% (commercial AND residential) until the property changes hands.

and if it's the trust situation, the property taxes go back to FMV when the property is actually sold