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'Unrealized Gains' is one of the methods by which the wealthy avoid paying taxes. When you read the article about 'Billionaire X paid 2% taxes this year' this can be the cause.

It works like this: you pay taxes on income, or realized gains (sold your stock). But you don't pay taxes on unrealized gains.

You have TSLA/AMZN/NVDA stock which has gained $10M, and you have a mansion/yacht payment coming due. You could sell the stock and pay $2M in taxes...

OR

You can get a loan with your stock as collateral. You may pay 7% interest but you still OWN the stock and the S&P grows at a rate of 10%, netting you a 3% annual profit on your collateral stock. AND the interest might be tax deductible offsetting other income taxes you may owe. You pay 0% taxes because you didn't sell anything.

Search for 'buy borrow die' for more resources on this strategy. This new tax proposal is trying to address the problem that the most wealthy individuals in our society pay a much lower percent in taxes compared to the average individual using this type of strategy.




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