(03-30-2025, 02:44 PM)Sneakers Wrote:

(03-30-2025, 01:04 PM)mikesez Wrote: Taking out a loan with the asset as collateral should be considered realizing the gain, but only for the fraction of the asset that was actually offered as collateral. 

For instance if I bought a thousand shares of Acme Corporation at $100 each, and more than a year later they have appreciated to $500 each, that is an unrealized gain of $400,000. I'm not saying that should be taxed. I'm saying that if I choose to take out a $200,000 loan, and I offer my shares of Acme Corporation as collateral, then a fraction of my unrealized $400,000 gain is effectively realized at that point, and I should be taxed on it. In this case the fraction would be $200,000 / $500,000 equals 40% of the $400,000 gain which would be $160,000.  The rate on that should be roughly 25%, So it becomes a $40,000 tax liability to create $200,000 of income off of my $500,000 asset. Today that tax liability for $200,000 of income would be zero. The fact that we don't tax that now is pretty unfair.  

You can read more about this, it is called the buy, borrow, die strategy. Google is your friend. 

To answer your question, if you realize a loss, yes that becomes a tax deduction. If my proposal were enacted, and you took out a loan offering a depreciated asset as collateral, yes that could and should become a realized loss and therefore a tax deduction.

First of all, to get a loan using stock as collateral, a bank will typically want double the loan amount at the current trading price.  For a 200k loan, that means 400k stock for security, so your tax calculation is wrong. 

Second, borrowed money is NOT income.  Income you can keep, borrowed funds have to be paid back.  It only becomes taxable income if the debt is forgiven by the lender, in which case you should receive a 1099-C.

Third, you just killed the home-equity loan business.  

Now let's talk about losses.  Under your plan, if I paid 50k for a new car (or boat, tractor, RV, etc.) a few years ago, and now it's worth 20k, I could take out a loan against it and the IRS would send me a refund for my "loss"?  SWEET!

The people writing the law would be free to use either the loan amount or the bank-demanded multiple of the loan amount in their tax calculation. I suggest the loan amount, which results in a lower tax.

As far as HELOCs, if it's a primary residence, its gains already aren't taxable, regardless of if the gains were realized as a sale or as a loan.

If it was a business vehicle, you could already claim its depreciation as a loss.  For a personal vehicle you can not.

Got any more misinformation?

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