As far as I understand it, a billionaire’s wealth is wrapped up in stock, which is used as collateral to borrow money to actually spend. So how do they pay off those loans? With other loans? Loans all the way down?
In: Economics
You pay them off with more loans. The theory is the value of the stock, property etc the loans are secured against has gone up, so you can get a bigger loan. And so on.
And then you die with the loans outstanding and your estate settles it up, the tax implications at that point are all different.
And you don’t otherwise pay tax on this cause the increasing value of the stock, property etc is only taxed when you “realize” it by selling it, hence the current talk about taxing “unrealized gains”. I should not for completeness that that tax is mostly being discussed for super wealthy.
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