I just got done looking at someone’s tax returns and for several years they reported millions in “negative” income… how is this possible when this person is a billionair.
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Rich people don’t actually use their own money for anything they borrow from the bank against their assets at insanely low interest, and then sell off assets to pay off their loans when they come due. When the assets are worth less than their buy in value, they report it as a loss and the difference is a tax deduction.
This is simplified and theres a lot of extra math and rules- but to put it in real terms. Say you own your house outright, you want to buy a second one for $300k and redevelop it into a two family as a rental investment. You go to the bank for the money to buy and improve the new property and use your house as collateral saying it’s worth a million if you were to sell today. They give you the million @2%. You finish the property and while you’re in the process of selling your note comes due and now the bank wants their million back so you have to sell your primary. You’re only able to get $700k because that’s really all it’s worth. You report a loss of $300k. You still own the rental so you bring in a partner to buy in at $300k and give the Bank their million.
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