Don’t keep doing what doesn’t work


• You buy a stock, its value keeps going up, you don’t sell it and you don’t pay taxes.

• If you need cash, you go to your broker and take out a loan, secured by the value of the stock.

• If the stock keeps going up, you never pay back the loan, and you can borrow more money if you want.

• Eventually you die, your heirs get the stock, and they don’t pay taxes on your gains. (This is called the “basis step-up”: When you inherit stock, the IRS pretends that you paid market value for it, so you don’t have to pay taxes on the previous gains.)

This is sometimes called the “buy, borrow, die” tax strategy.

{ Bloomberg/Matt Levine | Continue reading }