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Comment by alexpetralia | Hacker News Reader

This reminds me of this tweet:

https://twitter.com/oniontaker/status/1214540491577942017

Wow - "Enter Korean tax code. Korea has 50% inheritance tax on assets above $2.5m. When Lee Gunhee dies, his family will owe the government $7b. The family will have to sell personal stakes of Samsung-controlled assets, weakening the strong, complex investment structure they built."

That's pretty impactful in terms of potentially forcing the family to sell off control, isn't it?

What happens if they aren't able to sell off the assets at a high enough price to pay the inheritance tax? Does the amount owed scale with how much the assets are actually able to fetch in a mass sell-off like this?

There is absolutely no problem with liquidating a $7B slice of equity in a matter of weeks (probably even days). People don't appreciate just how enormous the capital markets are.

If it is a single stock it may still affect the price. That’s why big sell-offs are usually done over a long period of time, like weeks.

People also don’t appreciate just how small the capital markets are and how much they rely on market makers.

Weeks because you may need an actual human broker to find you counterparties.

I don't think that's the right way to think about this situation. The fact that Lee Kun-Hee is dead means that the family's efforts to restructure the company, consolidate power, and offshore assets is complete. Elliot Management called out Samsung five years ago for malfeasance but their efforts were stymied by a government led by the former disgraced president, Park Geun Hye.

I'd expect them to be able to finance paying the taxes with an equity collateralised loan. If not the entire tax bill, at least a big chunk of it.

Seems that more leverage and more debt is in fact the answer to everything. BRB, need to take a second mortgage to buy more equity index funds. I will then use the fund shares as a collateral for another loan, and you get the idea. I wonder why hasn't anyone thought of it yet! Time for a YC application!

It's only stupid if it doesn't work!

Step 1 - get as many loans, credit card debt, financing etc.

Step 2 - spend all the cash to buy bitcoin

Step 3 - bankruptcy

I don't think zeroing out home equity to buy bonds is a bad idea.

After all, you either have real estate exposure or some other one, bond or equity exposure. While I haven't done the analysis, I would venture to guess that investment grade bonds at the very least have lower volatility than real estate.

Do you think the investment grade bonds are going to yield better than the interest rate on a home mortgage ?!?

Yeah I doubt a bond would pay that well.. but he does have a point about risk exposure. Your mortgage could be thought of as an investment in the local real estate market.. diversifying that risk by buying shares in a REIT could be a good strategy... especially if you're in a low-growth area (ie outside of the big cities, midwest, etc).

Hey, here's a shockingly simple idea: don't buy a home if you don't want equity, rent instead.

There are systematic advantages to having a mortgage vs renting.

Maybe not, but you can easily move into lower grade and higher yield debt depending on the interest rate of your mortgage.

You jest but it could work out. Samsung has more than doubled their share price over the last 4 years. Tripled over the past decade. Additionally you have to consider that retaining the shares may be critical to maintaining control over Samsung. So that would be worth a certain premium. There's still risk, but theres risk in owning any piece of any company.

“Debt is morally wrong” is a useful heuristic in the context of working class people, consumption spending, and delayed gratification. In the context of the tax and liquidity challenges of the ultra-wealthy it’s just a tool.

If the theory is true, then the fact that they're announcing his death now means that they've finally put themselves in a position where they can pay the tax bill without giving up control of Samsung.

50% Inheritance tax would do wonders in the US. Honestly if you want the best people at the top then no one should start with a billion dollar advantage.

Or you could have the unintended consequence of zombie executives wandering the earth until it's in their family's economic interest to declare them dead and bury them in the ground.

My understanding is that this only happened in this case because Samsung is "too big to fail" for the Korean economy. Kia, LG, and Samsung combined make up 2/3rds of the economy.

Worth watching: https://www.youtube.com/watch?v=jRzysFhyZ8Y (@11:45 they talk about TBTF)

They are too big to fail and that’s why the government wants a single family to control it?

TBTF is the public justification they give, but the actual reason is probably that the chaebol and government have always been very intertwined, and not always in the direction of the government exerting influence on the chaebol.

I don't know why you're being downvoted, it's a fair question.

I assume that the government doesn't necessarily care to have a single family control it. But they'd perhaps rather not push a legal campaign against that controlling family, and risk causing harm to (or retribution from) Samsung in the process.

It has been working well so far. There's the old saying "don't fix it if it ain't broken." I think there's plenty of arguments to make that it is broken, but there are plenty to say it isn't. There are different views on this held by different people and different countries. Some would say break it up so it isn't too big to fail. Others say it is the size that allows it to do so well. Unfortunately the nature of the conversation is extremely complex and often these discussions turn reductionist.

I believe in the US it's around 40 percent for billionaires.

The federal tax kicks in at $11.5 million (although that is scheduled to sunset in a few years). If you happen to die in the wrong state the rate can be as high as 60%

> 50% Inheritance tax would do wonders in the US.

The US is already at 40%. The Feds want 40% of anything over $11.58 million when you die.

Going to 50% isn't going to do wonders.

If you wanted to severely adjust the wealth inequality caused by the extreme wealth of the top 0.01%, you'd want a 80% or 90% rate.

Increasingly the US Senate is rich enough it'd never be allowed to become law.

Only 0.002% of estates pay the tax every year. Among the wealthy that are close to retirement or death, the smart ones transfer their wealth to insurance or separate entities like a foundation, limited liability company, family limited partnership, or charitable trust.

That is wrong by a factor of ~100. 0.2% of estates in 2017 paid an estate tax. [0]

[0] - https://www.cbpp.org/research/federal-tax/ten-facts-you-shou...

On the other hand the government should not just steal half a family's wealth just because a guy died.

It's to any source corroborating that whistleblowers were disappearing and ending up dead?

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