zlacker

I'm pretty sure that whole notion of these magical loans to avoid taxes is a made up internet conspiracy theory.

A) Loans need to be paid back, with interest. The person must either be selling assets or drawing in other (taxed) income to pay back the loan. A loan could delays the taxes to a future year to let someone buy a house or yacht or whatever without the full tax burden in year 1, but they still ultimately pay all the taxes

B) If they die while still having outstanding loans, their heirs pay a 40% inheritance tax on everything above like 10 million, so there is no magic avoidance of taxes there, just a change in whether it's capital gains tax today or inheritance tax tomorrow.

I'd love to be disproven if someone can explain a real tax loophole, but as far as I can tell, the "Billionaires avoid taxes by taking out loans" thing is completely untrue.

>>marcus+(OP)
If I'm reading the IRS data[1] correctly, "debts and mortgages" are considered a deduction on the estate valuation, which means any money left in the estate (i.e. instead of in a trust) solely to cover loans would not be taxed. I think the idea is that you would roll the debts until death, at which point the estate can sell the securities with their stepped up cost basis, thereby avoiding (nearly all) capital gains tax.

I'm not an expert on this, and I could be misunderstanding some subtlety here.

[1] https://www.irs.gov/statistics/soi-tax-stats-estate-tax-fili...