Is there any indication the ultra rich structure loans like this to avoid taxes? Or is this just a meme that, for the most part, financially illiterate redditors like to throw around?
They were asked the question:
> If you take a loan out to live off of of 80 million you would at least need to pay 5% to make it a true loan. The IRS That is 40 million in interest over 10 years. You said .05% loans, that is not realistic because you would get hit with inputted interest and phantom income from the difference between your loan and the IRS AFR rate.
To which they answered as follows:
> To your third bullet point - that’s a great observation, but by law these products are actually securities, not “loans” as the term is used in Code § 7872. That’s why it’s important that the stock appreciation rights are the predominant means of profit from the transaction for the investment bank. Where the taxpayer and investment bank can’t come to an agreement that would result in these products being characterized as securities, the interest rate will be much higher - SOFR plus 1.5-5 basis points - but may be “paid-in-kind” (i.e., the interest is not required to be paid in cash currently but added to principal).
https://www.cnbc.com/2023/10/10/number-of-people-with-100-mi...
Once your money timeline stretches to the second generation one can start thinking in much bigger ways that have nothing to do with individual ownership of assets. The amount of assets doesn’t have to be large to start thinking in longer term cash flow cycles.
If it's a fake post, someone put a lot of time into making it convincing? They cite tax law and precedent cases etc..
I have not personally validated any of it myself though.
So this one random lawyer on reddit has hundreds of clients with a net worth of $300M+?
Or, they're LARPing.
I wonder which is more likely.
Those are not the only options. That's a pretty bad strawman.
I don't think that's necessary.
So, they are either a lawyer who has done it for hundreds of clients worth $300M+, or they are lying.
I see they claimed to "do it for a living". I see where they say it only makes sense for clients with 300M+ net worth.
There are plenty of other ways to interpret those two points. For instance, it may be a thing they do at their job, but not the only thing they do.
Could this guy be LARPing? Sure.
I looked up a few of the references, they look accurate. They would need to be an excellent LARPer to get that detailed. Or they actually know what they are talking about.
https://www.sfgate.com/news/article/Inside-look-at-a-billion...
I'm not sure many financial advisors for the super rich would be recommending this method based on this.
And most ultra-rich that own lots of shares of large publicly-traded corporations own them outright. So this seems suspicious I would say.
I mean I often see news about some CEO or other selling shares, and how this is announced in advance to not be insider trading. I have even seen sometimes the documents submitted to the SEC posted on the net. There are no trusts involved.
His advisor did his job by warning that this could go wrong if Oracle stock dropped massively. But it never dropped that far, so he was fine.
It seems like the most plausible explanation.