r/SipsTea • u/Misfett_toys Human Verified • 5h ago
Wait a damn minute! Feudal Lord explains he’s actually poor because the castle is technically an asset
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u/Even-Conference9309 5h ago
He’s illiquid not poor.
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u/TattiFeader 4h ago
His followers are too dumb to know the difference.
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u/DogPoetry 3h ago
well, they're 11
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u/austin23420 2h ago
Easily the most honest comment in this thread
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u/ElRiesgoSiempre_Vive 2h ago
...and a whole lot more than that. I was shocked when I learned that Mr. Beast has more subscribers than the entire population of the United States.
His videos get more views than the Super Bowl.
It's absolutely mind blowing.
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u/greebdork 1h ago
Tbf superbowl is irrelevant outside of US, Mr. Beast is international.
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u/Upstairs_Baby8424 3h ago
He’s liquid too if he wants to be lol. When they say “on paper I have X but it’s not real” it’s such nonsense. Oh it’s real. They can cash out a good chunk whenever they want. But they don’t want the tax payment and they also want it to keep growing.
Mr. Beast has plenty of money. Illiquid means he couldn’t sell even if he wanted to and all the money is locked up. There’s zero chance this is the case.
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u/Exciting-Possible203 3h ago
and also guarantee he doesn't have under 1 million in cash or cash equivalent
they might not be in his "bank" account but he probably has it in many different ways
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u/BoilerplateBillions 2h ago
thats just it, its "technically" debt. he's got plenty of credit available with $0 cash advance charges, using all of his assets as collateral. "Technically" he's borrowing money and has negative money because that money is debt.
but its all collateralized and paid with his revenue. Sure, he "Technically" doesent make any money because his revenue goes to service the debt, and what doesnt service the debt gets invested and becomes an asset that serves as collateral to increase debt limits.
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u/RelaxPrime 2h ago
If debt is negative money, assets are positive money.
Its not hard guys.
These guys are still in the positive hundreds of millions.
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u/CaptainSparklebottom 2h ago
But the asset isn't cashed in for the loan. The loan is given in the respect that when it comes due you can cash the assets to cover the loan. The loans are accumulated until death when the inheriter of the wealth, the children, will have all assets with a zero step up basis after the original owners death to cash in for 0% tax bill to cover the loans, and then continue the cycle. It's called buy, borrow, die
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u/snksleepy 2h ago
He has a sizeable cash flow and can raise enough to fund a multi million dollar video without much difficulty.
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u/Green-Moment-4509 2h ago
When you can “borrow” a billion against your YouTube account and brand.. you’re a billionaire if you ask me
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u/thecastellan1115 3h ago
I feel like Reddit has that info graphic on how debt works for billionaires on repeat... maybe we need to start printing that off and posting it all over the place.
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u/Starslip 2h ago
Exactly. He's given loans with his assets as collateral, they have extremely generous terms that allow the assets to become more valuable at a faster rate than interest piles up, and he never gets taxed for it cause it's not income. He'll continually refinance the loans or take out other ones to pay off the first while his net worth keeps growing.
With the added benefit of getting to sell this "I don't actually have much money" story to credulous fans
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u/hacksong 2h ago
I haven't seen it yet.
May I?
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u/Starslip 2h ago
I don't know if this is the specific one they mean but I think I've seen this on reddit https://imgur.com/a/96rWUjq
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u/hacksong 2h ago
I feel like that's a loophole that should've been closed before I was born.
Except, I guess, the people who write the laws really like that being open.
So fuck me and the trailer I grew up in. That's just explained how so many rich people "pay no taxes"
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u/two-cans-sam 1h ago edited 17m ago
There’s an even worse one which is the “step-up basis.” Where if a person dies, the person who inherits the stock doesn’t pay capital gains tax on the total gains of the stock, just on the gains since they inherited it, and there is no capital gains tax on the increase during the person’s life.
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u/RetiredRacer914 1h ago
In some states they don't even pay sales tax on most of the shit they buy because they account for it as a business expense. They're not supposed to do it that way, somebody's supposed to pay sales tax on everything sold at some point but they often don't.
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u/No-Bison-5397 2h ago
Not only that but he's probably leveraged against all his assets so his income goes through the business into assets which are leveraged as debt so he pays nothing to the tax man.
This is just admitting tax avoidance.
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u/lemmysbetter 5h ago
So he takes out loans on his stocks to avoid income tax. Gotcha. Not poor.
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u/Little-Resolution-82 5h ago
Just like every other rich person
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u/sicurri 4h ago
He just doesn't want to say it because otherwise hed reveal the trick that mostly only the rich can take advantage of.
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u/Lemounge 4h ago
Can someone please eli5? I feel a bit silly trying to learn about this stuff since there's generally a lot of assumed knowledge when you're googling these topics and don't fully comprehend what it means and how someone could benefit from it
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u/Karew Human Verified 4h ago edited 3h ago
You own a lot of valuable stock. That stock has an estimated value. Banks will issue you loans with the stock as collateral (the bank gets the stock if you don't pay back the loan).
Loans are not a kind of income, they are debt, since you owe the money back.
The rich person pays back the loan with a certain amount of interest. That interest payment is lower than the amount they would have been taxed if they sold the stock outright.
Edit: Also, because stocks are easy to sell and track compared to other collateralized assets (like cars, real estate, businesses), you can get very, very low interest rates on the stock loans.
Edit 2: This is not an infinite money glitch. They repay the loan eventually. The reason it's useful is you can use your stock to get a large amount of cash right now for whatever you need, you repay slowly, you don't lose the stock. If your stock appreciates, it's incredible for you. Also you get to say stuff that is technically true like "I don't have millions of cash on-hand" and "I have a ton of debt", even thought you're rich.
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u/dbudzik 4h ago
Very well-explained. As a teacher, I appreciate a well-constructed explanation.
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u/leeps22 4h ago
The real big tax evasion occurs when wealth really outstrips any reasonable consumer spending, the 100 million plus crowd. You service the debt by taking out additional loans.
Say you have 100 million to leave behind and you want to leave 75 and burn 25 from now till you die. Selling off the assets is a taxable event. You pay taxes on the difference between your cost basis (what you paid) and your selling price. These loans will need to be paid back via these assets at some point, and it will be a taxable event. If these assets are inherited the cost basis becomes the value of the assets when they transfer over. In order to leave 75 and spend 25 its better to just take out 25 million in debt and leave the kids 100.
Its called step up in basis.
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u/1CUpboat 3h ago
Basically all of this is why I’ll always be in favor of an estate tax. Others can call it a “death tax”, but it’s one final backstop that ensures massive wealth is at least taxed once.
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u/tigeratemybaby 2h ago
Not sure why the US has such a ridiculous huge tax loophole.
Almost all countries calculate capital gains from the price that the asset was purchased at.
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u/1CUpboat 1h ago
Because capital gains tax and estate tax have been targeted for decades to be weakened.
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u/Irascible-Enquery 1h ago
Imagine twelve billionaires pointing at an 80 year old widow with a dowdy suburban house and an adult kid who has cancer, saying “how is it fair for ANY OF US to have to pay full capital gains, if it means THINGS LIKE THIS CAN HAPPEN??”
and then imagine the rule is being voted on by 287 tenza millionaires.
and then imagine they only lose their jobs if the people they represent stop being angry about abortion or trans athletes in sports.
and then imagine that if a person with actual zero net assets and piddling income hears about this, they think “yeah, those taxes I think I might be paying are the only reason I’m not just like them!”
and you have US politics in a nutshell.
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u/IBM296 3h ago
So the kids will pay your 25 million loan and actually get 75 million, not 100??
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u/wickzyepokjc 1h ago
No. The estate will sell stock to repay $25m debt and pay capital gains on the appreciation. If it's all appreciation that's $5m. Then the remainder of the estate will be taxed at 40% after a $15m exemption ($30m for married couples), for amounts over $1m. Assuming $30m exemption, that'd be about $15.6m in taxes. So the heirs would inherit $54.4m (less in some states). Their basis would be stepped up to that.
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u/OffalSmorgasbord 3h ago
Anytime you hear congress or the Epstein Class bitching about "Death Taxes", it's because they want to get around their families having to pay the taxes from their estates after they die. It has fuck all to do with a family farm, like they say.
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u/PitchDismal 4h ago
How do they pay back the loan? With another loan?
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u/hellisonfire 4h ago
This is the part I dont understand either. Because if they earn the money to pay the loan, that is taxed and they paid interest on the loan. Are they just rotating the stocks being borrowed against and just creating money to spend out of thin air?
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u/SpecialistAd5537 4h ago
If you pay 3% on the loan but can net 7% with the loan you still make 4%
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u/EndonOfMarkarth 3h ago
Why would a bank lend money out for less than the treasury rate on volatile collateral and lose money?
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u/SpecialistAd5537 3h ago
The bank gets their rate, its fixed by regulations. But the person borrowing is free to invest it however they wish.
So if prime interest rate is 4% then thats all the bank can charge, or sometimes with a modifier like prime+1 mortgages.
The s&p 500 has averaged 10% per year so you could just park it there and net 6%. Or any other investments that can net more than the prime interest rate the bank collects.
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u/HecklerusPrime 2h ago
From the bank's perspective, the loan is guaranteed income. If they invested the same amount they loaned, there's a chance it'd devalue in the market if stocks tumble.
The only way the bank loses is if the rich person doesn't pay back the loan AND their stocks tumble AND those stocks (which the bank claims when the loan defaults) never reclaim their value, which is all exceedingly unlikely.
So the smarter move is for the bank to give the loan because it means the banks gets some profit or a lot of profit and all the downside risk is on the rich person.
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u/padawanninja 4h ago
They get a loan on a different tranche of stock. Or art. Or property. Or... Or.... Then they move more money around and take out extra loans to pay those others back. It's a merry-go-round of debt.
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u/Faribo_Greg 3h ago
Or sell some of the stock because the capital gains rate which is much lower than ordinary income.
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u/Wessssss21 3h ago
to put very basic. like SpecialistAd said. Stock gains are typically more than the loan interest.
so you borrow 5 dollars. with interest you'll owe 6 back to the bank, but with that 5 dollars you can make 7 before the loan is due. so you use the 5 dollars, make your 7 and then pay the bank back it's 6 and now you've made 1 dollar doing basically nothing but sitting on money. only people do this with millions and millions of dollars.
it's bullshit accounting basically.
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u/thewhizzle 3h ago
You don't understand because they are not telling you the full picture.
If billionaires really could just avoid taxes into perpetuity, then we would never see them liquidating their equity and ever paying capital gains right?
But they do, and we see the public filings that they have.
Debt service on these loans would outpace whatever capital gains they would have paid in 5-6 years. Even at the low rates they are able to negotiate. The scenario where it makes financial sense is if the stock appreciates. Then the accounting makes it worth it. But there's a risk of your equity for down in value.
This has been asked ad nauseum on the r/askeconomics sub where you will actually get good answers to these sorts of questions
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u/-LabApprehensive- 2h ago
Maybe go have a glance at Peter Thiel’s tax evasion method. Mit Romney used it as well. What they do is issue themselves special shares of their soon to be publicly traded companies. They value these shares at some ridiculous par value like $0.001 per share and then they tell the IRS that they are buying these shares in their ROTH ignoring the hard limit on ROTH IRA contributions by pretending that fair market value doesn’t exist or could not possibly be attempted to be estimated. Better use par value these tax evaders say, with a wink and a nod! Now they have several billion dollars in a ROTH IRA that will ever be taxed!
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u/itsnotthatsimple22 3h ago
They also don't realize that how much a lender will force the borrower to over collateralize the loan. This is to account for potential market volatility and the impact of having to dump a large amount of equities into the market in a "fire sale."
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u/Stu5000 3h ago
You "capitalise" the interest. Which means you borrow more money than you need and use the extra to make the interest payments.
It works great when the assets you're borrowing against (shares, property, etc.) increase in value faster than the interest you have to pay back to the bank.
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u/el_cstr 4h ago edited 3h ago
The interest rates in the loans they take are incredibly small, since billionaires are safer for banks to lend money.
They use the loan money as seed for investments, which appreciate in value, which they then use to pay only the small interest rates of the loans.
They then use those newly adquired assets as collateral to take out more loans, pay the bare minimum, and repeat indefinitely.
Then they die, the banks take their assets as collateral, and whatever is left is inherited, which basically wipes any capital taxes that could have appeared if those assets have been realized.
So they live a life of luxury basically tax free, while the bank takes a ton of money basically tax free, and their heirs inherit a ton of money basically tax free.
How could one fix this? Idk, probably tax capital gains over a certain threshold (something crazy, like 100 millions)
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u/SenileGhandi 4h ago
You can't honestly believe that right? A bank says sure I'll lend you a million bucks since you have a billion in assets at a 5% loan and I'll just never collect payments from you, I'll just keep growing the balance?
No dude, no loan in the history of loans is okay with not receiving payments. Yes, they absolutely can increase the loan, but it is being paid down monthly and this is done by selling stock and paying taxes. It's still a sweet deal, the stocks appreciate well beyond what the loan grows at so it's essentially free money, but both parties have to win in an arrangement like this.
Sometimes this website just gets its head buried up its ass I swear
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u/Karew Human Verified 4h ago edited 4h ago
The payback can be more complicated. They could use the loan to buy something or invest in another business that helps repay the loan. If the stock they risked gains value, they can refinance the loan and take "profit" out.
It's vaguely similar to buying a house. You get the house up front, you repay the value over a long period. You hope the house appreciates in value, you could refinance. You use the house loan to live your life now (instead of waiting 10+ years) and make other income easier to obtain.
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u/tannels 3h ago
Sometimes they don't bother.
Say they borrow 3 million dollars on the 10 million in stocks they have. If they get that loan even at something like 3% (oftentimes they get it at a much lower rate) then they have to pay about $90,000 a year in interest. Now the market grows on average about 8-10% a year. So even after they pay the interest, they still make 700-800 thousand a year.
Then, when they die, whoever inherits their stock, get something called the "stepped up basis" which means they inherit the stock at the current value of that stock on the market, which means they can immediately sell with no capital gains tax. Then they can pay back the debt to the bank, re-invest the rest and start it all over again.
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u/wolfansbrother 4h ago
or if your stock suddlenly is worth a good amount more, you refinance and get more money.
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u/tannels 4h ago
You forgot to mention that because they have so much money in stocks, they can get APRs of less than 1% on that loan. So they take out the loan, then that money gets to sit in the stock market (which goes up on average of around 10% a year) so by the time they pay back the 1% interest, they've made 10% on the stocks, so really they get to keep making even more money while doing nothing and paying no taxes.
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u/Async0x0 3h ago
You forgot to mention that because they have so much money in stocks, they can get APRs of less than 1% on that loan.
Prove it.
There's no rational basis for a bank to lend for 1% when it can get a higher rate literally anywhere else. The effective rate from the Fed, the least risky counterparty on the planet, is currently 3.62%. So who is going to lend for riskier 1% when they can get a guaranteed 3.62%?
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u/tannels 3h ago
Current SBLOC Interest Rates | Updated Monthly [8 Brokers]
That shows that you can get a loan right now against 10 million dollars or more at a rate of .7% plus SOFR, which right now is 3.59% today, but was as low as .01% for most of 2021/2022, then went way up for a bit and is now coming back down. That's for regular, widely available financial institutions that any joe schmoe can get access to.
The ultra wealthy have elite private financial institutions that cater only to them that are willing to offer far lower interest rates for lending.
So for the ultra wealthy, they get to borrow at that rate, which has historically gone been as low as .01% (in April 2021 for instance, during Covid.) They likely get even lower rates because the financial institutions really want them to keep their wealth with them and will be willing to make a deal to keep such a wealthy person using their services.
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u/Pleasant-Delay-7369 4h ago
I got you big dawg. The wealthy invest their money into appreciating assets (e.g. things that become more valuable over time like land). While these assets are taxed, they are not taxed to nearly the same extent a billionaire would be taxed on their income.
Now, this locks up their money in the assets (e.g. you can't spend land), and if they sell it to have money again, well shit that's income (or a realized gain) and will be taxed.
Here's the fun part. The wealthy then take their gigantic portfolio of uber expensive assets and visit a bank where they offer up some portion of that portfolio as collateral to get a crazy big ass loan at very favorable terms. This wealth is not taxed because it is not income (it's actually the opposite: debt).
This way, they keep all the highly money making assets and investments and pay no (significant) taxes. You can do it too if you have hundreds of millions of dollars worth of assets to leverage a crazy large loan at super low interest.
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u/XZIVR 4h ago
Well ain't that some shit. Seems like a major loophole. I wish they'd just make you pay tax on something before you can use it as collateral or something.
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u/Pleasant-Delay-7369 4h ago
It is a deliberate major loophole brother. There's only ever been two classes of people: Have's and Have-Not's.
The Have's are only ever up to one thing: making sure you have not. How do you think they have so much?
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u/ZealousidealHour7273 4h ago
https://www.sciencedirect.com/science/article/abs/pii/S0047272725002178
These are the actual facts about what Redditors are talking about.
Tl;dr-borrowing against assets is (mostly) a social media rumor that has become bedrock Reddit knowledge.
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u/Oneangrygnome 4h ago
Invest in/be awarded stocks. Stocks increase in value for whatever reason. Now you’ve got a choice:
Sell, pay taxes on “realized gains” (profit), and spend your money. Done deal.
Or, take a loan against your stocks at a low interest rate. The stocks are your collateral for the loan. Repay this loan, or… if the stocks went up more.. double down! Refinance for a bigger loan!
Then one day, you die. You never paid taxes on the obscene wealth you held, and you can still spend all the cash.
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u/steve2theE 4h ago
Basically, if you have millions of dollars worth of stocks, you're a millionaire. But, if you cash any of them to get money, that cash out can be taxed. Loan disbursements are not income and therefore not taxed, so if you take out a loan and use the stocks as collateral, you're essentially cashing the stocks but doing it as "debt." You can then pay back the loan over time or let the bank take the stocks, either way you get the income tax free.
Since stocks don't count as income until they're cashed, any "debt" he incurs in order to skirt taxes looks, on banking forms at least, like he's under water.
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u/AsbestosDude 4h ago
Debt?
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u/trevorneuz 4h ago
A better measure of wealth is "how much money could this person reasonably put together in one week to ransom a family member"
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u/Aggravating_Deer_641 4h ago
Favorite defense of the capitalist bootlicker. “They don’t actually have that much money! It’s all assets!”
Yes. Assets they can borrow against to get whatever amount of money they need at any time.
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u/AsbestosDude 4h ago
Im poor. I only own 4 islands, 12 cars, 24 houses and a few independently run franchises i get paid royalty from.
BUT I HAVE NO CASH IN MY CHEUQING ACCOUNT SO IM POOR JUST LIKE EVERYONE ELSE
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u/duaneap 4h ago
Tbf any accountant not advising them to do that is not doing their job to the best of their ability. I have zero time for the guy whatsoever but he pays people to manage his money and does what they say, he’d be a fool not to follow their advice.
As with everyone lambasting Hermione over the Panama Papers, ultimately you gotta hate the game rather than the player, cos most players do not give a fuck what we think.
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u/Intrepid_Ad1715 4h ago
I understand what you are saying but currently, the players are in control of the game and making the rules.
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u/insufferabletoaster 4h ago
I hate the game plenty, but I also hate the players who are keeping the corrupt game in place.
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u/torBrow75 4h ago
I don't have anything close to Mr. Beast money, but when my wife and I went to create our will, our lawyer spent most of our meeting telling us about the various maneuvers they worked into it to make sure we would be giving as little as possible to the state (and, of course, more to our children). It felt a little sleazy, but we certainly didn't dissuade him from working his legal magic for us.
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u/duaneap 4h ago
If I for even one second thought that when I died the money taken from my estate would be used in a positive way by a robust, efficient, caring state, where charity wasn’t actively required to save lives from hunger and combat homelessness, I might feel worse about making sure as much of the money I earned by working my ass off my entire life while also paying income taxes ended up in my children’s hands. Rather than pissed up the wall.
But here we are.
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u/Loves_tacos 3h ago
He has explained it before. He doesn't take a loan agaisnt stock like a traditional billionaire. He takes loans for upcoming videos. He reinvest everything back into videos.
He is rich because the company he owns is worth a lot of money, but he doesn't have a lot of cash he can spend frivolously.
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u/Previous-Bake-4929 5h ago
Poor guy, has less than a million, what's this world coming to
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u/3BlindMice1 3h ago
Keep in mind that's basically his walking around money. If he ever has to buy anything really big he'll just finance it through his bank. This isn't really "I only have $1,000,000" it's "$1,000,000 is pocket change to me" so the actual meaning is the opposite of what he's saying
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u/MaddSkittlez 4h ago
And here we are living the life. Let’s send him all of our 2 dollars because he needs it more
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u/AntakeeMunOlla 4h ago
Stupid kids would definitely send him money if he asked for it. I watched a bit of one of his videos where he was opening mail while randomly giving prizes or something. People were sending him money with messages like "I've been doing chores and saving for 2 years for this $100". They were definitely counting on him sending more back.
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u/epicredditdude1 5h ago
I just simply don’t believe him. I think he’s deliberately lying.
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u/JD-Moose 5h ago
He's just playing verbal gymnastics
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u/---0________0--- 3h ago
Beast has a lot more in common than Trump/Elon than he thinks.
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u/ObnoxiousAlbatross 2h ago
One of the Trump lore stories that 'successful' men in the 90s told went like this:
Donald Trump and his daughter Ivanka were walking in to Trump tower and there was a homeless man sitting outside begging for change. Ivanka implored her father to give some money to the man, to which her father replied, "Why? He has more money than we do?"
This story was told in exactly the same vein as the story Mr Beast is telling here.
He has a lot in common with them, absolutely, and this is the evidence.
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u/Admirable_Ardvark 5h ago
No, this is literally how most extremely wealthy individuals operate. They carry all their wealth in assets (from stocks to property and everything between) and they borrow against these assets to avoid a large amount of taxes.
He's just spinning it as some woe is me bullshit to seem more relatable to the average person.
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u/mancitycon 4h ago
I get that's how they live rich, but what do they pay their loan back with? A bigger loan and their next loan just keeps getting bigger and bigger? They must be making money through businesses so how do they avoid paying tax on that when there's an obvious digital trace of money going into a bank account? Do they just spend everything they earn before the tax year and claim they barely made anything?
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u/MetalSufficient9522 4h ago
Interest from the money makes the loan payments. It is structured so that the loan interest rate is always less than the interest they make on the actual money.
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u/CalligrapherExtra138 4h ago
Also the interest rate on these loans is insane because of how secure the asset is, like ~0.5%
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u/mrdr234 3h ago
Is that really true? Treasury bonds are hovering below 5 percent now. Banks think Amazon stock is more secure than treasury bonds?
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u/Artistic_Ad_8876 2h ago
Yeah because worst comes to worst, owning Amazon's warehouses/server infrastructure is an amazing prize to walk away with regardless of what the state of the economy actually is. And its not like the banks are ever going to think that they will actually default on the loans.
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u/Admirable_Ardvark 4h ago
Loans don't count as income and yes you can get multiple loans and use the funds for whatever you'd like (including paying other loans back). This makes your "income" effectively 0 assuming you only make your money off asset growth.
Obviously he makes money off his videos and sponsors and such but there's other ways around these things as well.
The long and the short of it is that the systems are built for rich people like him and not for you and me.
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u/KochuJang 4h ago
Oooh, I get it. So as long as their assets appreciate at a faster rate than their debt, then they just keep a steady cycle of borrowing and paying off debt while keeping to a certain ratio. That way their debt doesn’t outpace their net gains. Shit is staring to make sense. It really just boils down to ownership of appreciable assets and there is only a finite amount of that shit, despite what the rich try to tell us. The other game they like to play is that once a new significant value stream is created or discovered, it’s a race to control it so that scarcity can be controlled to maximize gains once again…because fuck all ya‘ll imma gets mines.
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u/After_Counter735 2h ago
If you want to do some of your own research this strategy is called the Buy, Borrow, Die scheme, the point of it is to avoid taxes by taking these loans then once you die, your inheritor can then sell the stock to pay off those loans tax free.
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u/ThePenIsTinier 4h ago
Basically, by not having to sell your investments, you make more money on those investments than the interest rate of the loan.
You still have to pay taxes when you sell your stocks after a long while, but in that time you have made significantly more due to compounding interest on your investments.
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u/StrawDog- 3h ago
This right here. There is no good reason to keep a bunch of wealth liquid, it doesn't beat inflation and gets hit harder by taxes. Almost all wealthy people carry a bunch of debt, its a great way to save money on the tax bill.
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u/kylebisme 3h ago
He's still almost certainly got multiple bank accounts with more money in them than many people watching the video. Sure, he's also likely got more debt than cash on hand, but only because he has far more than enough assets to cover it.
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u/No_Rec1979 5h ago
He's hiding behind the unrealized capital gains loophole. If you buy a stock at $1, and then it goes up to $100, you don't have to pay taxes unless you sell it.
So instead you never sell, and instead borrow $20 with that $100 worth of stock as collateral, and then you can be like "I'm super poor on paper".
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u/Admirable_Ardvark 4h ago
You mean "super poor in liquid wealth and filthy rich on paper" because he is filthy rich on paper.
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u/Sit_Ubu_Sit-Good_Dog 4h ago
instead borrow $20 with that $100 worth of stock as collateral
I’ve never understood how this gets around taxes? Wouldn’t you need to sell some of the $100 worth of stock to pay back the loan? Where does the money to repay the loan come from?
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u/No_Rec1979 2h ago
If worst comes to worst, you sell a bit of stock. But ideally you take out another loan to pay off the first one.
It's kind of like living off credit cards, only the interest charge is so small you'd be a fool not to do it.
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u/GoanShiteInABucket 2h ago
If you have $100 worth of stock as collateral, you might be able to borrow $70 against it (the other 30% as headroom for the lender to allow for any volatility in the underlying collateral e.g. the $100 worth of stock decreasing to $90 of value).
/u/TahoesRedEyeJedi seemingly got downvoted for saying "Another loan" but his answer is correct (if not overly simplified).
The borrower refinances the original loan (or series of loans) near the end of their term or when interest rates are favorable - in other words, they borrow more or less forever.
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u/Ricktor_67 4h ago
Yep. Funny how they always cry they are really poor and we can't tax them but they have no problem coming up with $300million for a new yacht.
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u/BoringBeat5276 3h ago
Yeah it's not a loophole so much as something rich people take advantage of. You wouldn't want to pay capital gains on your house for instance until you sell it. As most people wouldn't have the 10s of thousands lying around. Instead they need to make capital gains a much more specific thing and close this whole bullshit where they get paid in stocks and shit so they can just get loans on those assets instead of munny
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u/Radiant-Mean 5h ago
It’s literally impossible to hate billionaires enough. These people are insufferable.
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u/JeromeBarkly 4h ago
They all have that dead eyed sociopath look.
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u/handsomeal-02 4h ago
It's actually fucking insane that a YouTuber is a billionaire. I've never watched a single video of his and I never will, but he can fuck off.
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u/Oraistesu 3h ago
The only thing related to him that I've ever watched is the pair of Folding Ideas videos dissecting the absolute sloppy mess that is the Beast Games. But I'm in my 40's, so he was pretty effortless to ignore.
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u/Icy_Party954 4h ago
I feel we should pass a law that anyone who says this on television with a network of more than 3 million is fired into the sea
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u/WinBeeCards 5h ago
You don't understand how Billionaires work. They don't own things that can be taxed and they don't make salary. They get paid in investments and take out loans on those investments to live off of. The loans can't be taxed.
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u/EncabulatorTurbo 5h ago
I mean they can be taxed, politicians just dont want to do it, they absolutely could tax investment backed loans for personal use (home, vehicles, etc) by considering any investments used as collateral to be Actualized for example
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u/davidspdmstr 4h ago
Because the politicians are rich as well and then they would have to pay taxes.
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u/choyMj 4h ago
If they get paid in assets, that's still taxable at the value of the asset at the time of the transfer of ownership.
Now if said assets increase in value while in your possession, those are unrealized gains and are not taxable until the gains (or losses) are realized. And gains are measured against the value of the asset at the time to acquisition.
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u/factoid_ 5h ago
They need to be taxed. There’s been proposals for how to do it.
It’s always a game of whack-a-mole with the rich. But we have to keep fighting back and not just let them win by finding more and more tax free loopholes to avoid paying their fair share
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u/Prize-Analyst-1121 4h ago
How do they pay the loans back ? If they sell stock to pay the loans doesn't that get taxed ?
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u/davidspdmstr 4h ago
You take out another loan to pay off the previous loan. As long as your assets increase faster than the rate you spend money you're fine.
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u/EternalNewCarSmell 4h ago
So let's say you have $10 million. You take a loan of $200k to live for the year. This is only 2% of your entire portfolio, so the bank is happy with this arrangement. So happy they give you an interest rate of like 3% or some shit.
After a year, you now owe $6000 in interest. But your stock portfolio gained let's say 6%. So now you have $10.6 million. You take a loan for another $200k to live on, plus the $6k in interest from last time. Now this is only 1.94% of your portfolio so the bank is still happy to give you the loan. You've now leveraged a total of less than 4% of your portfolio as collateral, and this is assuming modest gains and that you received nothing else during those two years. You can see how this can keep going on for quite some time, especially if you keep getting more investments.
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u/boreal_ameoba 4h ago
I hate this stupid meme. News flash, they have to create taxable events to service the debt. No one is giving them 0% infinite term loans.
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u/Greedy-Employment917 3h ago
Please explain who's is offering interest free loans for all of this money without collateral?
None of you can because what you're alleging ISN'T A REAL THING.
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u/Sudden_General628 5h ago
But he spends more money than we have in our bank accoinrs
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u/factoid_ 5h ago
I fucking hate rich people who try to convince everyone else they’re actually poor
Rich people don’t live like us. They take out loans at stupidly low interest rates and live off that.
He keeps his money in his company until he needs to make a loan payment.
The loan loophole needs to be closed
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u/Misfett_toys Human Verified 5h ago
Completely agree. It's disgusting how they try to cosplay as the people they fuck over. Reminds me of that clip of Trump telling one of his kids that they were more poor than a homeless man on the street
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u/factoid_ 4h ago
He’s also wearing a several thousand dollar jacket over a hundred and fifty dollar white t-shirt while doing it.
And I remember the Trump interview you’re talking about. That was a story told by Ivanka. He even tried to convince his own kids they were poor
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u/C-ZP0 3h ago
Nah, “buy borrow die” doesn’t work the same for MrBeast as it does for someone like Musk or Bezos.
Bezos and Musk hold a ton of stock in big public companies. It’s stable, easy to sell, and worth way more than they paid for it. That makes it perfect to borrow against cheaply, and when they die the step-up in basis means all that gain never gets taxed.
MrBeast’s wealth is mostly tied up in his private companies that depend on him personally, so lenders won’t let him borrow against it as easily or cheaply. He’s also young, and the “die” part is the whole payoff, so he’s decades from it. Plus a lot of his money is regular taxable income from sponsorships and operating his businesses, which the strategy does nothing for.
So he can borrow against his equity some, but it’s a weaker version. The full tax dodge really works best for old, stable, liquid stock wealth.
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u/CaffeinPhreaker 5h ago
Gave my last 30 bucks to my mom today for gas. I feel ya millionaire, I feel ya
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u/Impressive-Egg-7444 5h ago
Lol dude who lies a lot says something far fetched. In other news, its Tuesday.
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u/Sundett 4h ago
So he's taking out loans using his stocks as collateral to avoid income tax.
That's like the bread and butter of being rich lol.
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u/reigninspud 4h ago
I’ve not seen many more disconcerting faces than this man’s. Looks like he unhinges his jaw and eats kittens perhaps.
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u/ExtraEmuForYou 4h ago
This is how they game the rest of us into thinking they are not as wealthy.
Like this dude is rich.
So rich that banks get rich off him being rich.
That's how Elon bought Twitter. They allow these people to borrow off their assets, leverage their holdings. The people are more or less considered assets themselves and get to take out insane loans, AND THEN declare them on their taxes so they don't have to pay taxes.
This is how the rich get richer.
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u/Odd_Collection7431 4h ago
do they think this grift tricks us anymore? if you can borrow against it, we can tax it. pay your fair share, money hoarders.
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u/WarcraftTurok 4h ago
"I'm not rich I'm just doing the same loophole every other rich person is doing"
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u/ImaJimmy 4h ago
For a moment I was thinking, "Oh come on, we all know the trick where you borrow against your assets..." But then I remembered, "Oh right, he has a young demographic."
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u/SebastianFerrone 5h ago
And the money he stole from his Fans with bitcoin rugpull?
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u/etfvidal 4h ago
Does this 🤡 not realize there are tons of other people also w/ negative accounts? & even a lot of the kids that are his target audience probably don't even know that their parents already fucked up their credit!
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u/ohjeaa 4h ago
This is called "Buy, Borrow, Die." It's how all of the worlds richest people live. Revolving loans on their assets without spending their own assets. Jeff Bezos, Elon Musk, Bill Gates, etc etc etc. It's what all of them do. Furthest thing from poor.
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u/Particular_Clue3325 4h ago
Most millionaires & Billionaires: “Well, actually I’m just “middle-class.”
Ha ha ha. Sure, Jan.
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u/Realistic-Walk9691 3h ago
Really? Because I have a negative bank account balance and am getting evicted if I don’t come up with rent asap. You can buy food with your “negative money” I can’t.
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u/YugeChesticles 3h ago
Billionaire on paper means he's invested in lots of things that he can borrow money against and avoid paying tax. Like all the other billionaires do.
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u/beardeddragon0113 2h ago
"It would take me 4-5 business days to liquidate my assets therefore I'm actually poor and have no money" is WILD.
Like, I've panicked before hoping I could transfer money quick enough but come on. Don't pretend you're "just like everyone else" or that "the people watching my videos actually have more money than me" smh
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u/XlikeX666 2h ago
that's definition of rich....
OWN everything and does not need watch bank account while buying insta noodles.
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u/Ok-Customer9821 4h ago
Unrealized gains tax needs to be a thing. My property taxes went up because my house is worth more now even though I didn’t sell it. Unrealized gains tax. Where is it for the billionaires?
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u/supbrother 4h ago
It needs to be a thing for the ultra wealthy**
I don’t think it’s fair to tax average people on unrealized gains. What if I get taxed on my brokerage account that’s just invested in index funds, and then the stock market tanks? I’ve now paid taxes on something that actually lost value. BUT if you’re filthy rich then it’s fair to do this IMO, maybe have an exemption on the first $10 million or something.
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u/RaptorXFactor 5h ago
He's probably telling the truth. They have money locked up in trusts and he borrows money from the bank and lives off the loan. The super rich manipulate the system to not have earned income, which is heavily taxed.
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u/Radiant_Safe1228 4h ago
I'm borrowing money tax and interest free while my investments continue to make me richer.
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u/McDergen 4h ago
Is this dork trying to get sympathy from us like we’re stupid or something?
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u/thisisasetupisntit 5h ago
His corporation though has 5 billion. But that's not him right?
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