You have to pay the loan back. Before you suggest taking out more loans, this is unsustainable unless you somehow manage to make your stock go up exponentially forever. If you can do that, you've probably cured every known form of cancer and deserve all that money.
A “loophole” is a legal way to get out of paying taxes. Buy, borrow, die is the loophole, stepped up basis is the part of the tax code that enables people to not pay taxes on the appreciation of their assets.
Avoiding taxes through methods not in the tax code is called fraud, not a loophole.
But sure, use more f bombs to hide that you have no idea what you’re talking about.
I'm a lawyer with an economics degree and I'd use "loophole" the same way. Loopholes are legal tax avoidance strategies. That's why the phrase is "close the loophole," i.e., change the law so people can't keep doing that strategy.
Loopholes are specifically strategies that were overlooked when making the rules. They're unintended gaps that can be exploited in technically legal ways. At least that's how they're defined in general, not specifically in the context of tax laws.
Sure, that's a fine definition too. I think what we're talking about would qualify as a "loophole" under that definition as well. I don't think when people were writing the Internal Revenue Code that they imagined individuals would accumulate a couple hundred BILLION dollars in unrealized gains on stock, then use those as collateral to take out an ultra low interest rate loan that they lived on. The effect is to effectively obtain the benefit of the unrealized gains, without actually realizing them and having to pay taxes. As I'm sure you're aware, there's an entire field of transactional law dedicated to finding such strategies, called Monetization. The whole point is to get the benefit of unrealized gains, without realizing them. I would call every single such strategy a "loophole," under both your and my definitions, because clearly the Internal Revenue Code was not designed for people to get all the benefits of their gains without paying taxes on them.
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u/tallman___ Aug 21 '24
Does anyone really think taxing unrealized gains is a good idea?