Spinal Tap

Long-Term Capital Gains Tax Expectations

Good point Brian--any Private Banker who has worked with the ultra high net worth community has made their living doing exactly what you described--lending people money at 5.00%. This 5% interest is an "above the line item" for the borrowing entity owned by the rich person in question. Therefore, the borrowing entity gets to deduct 100% of this interest expense. With a 40% all in tax rate in New York, the effective rate of borrowing is thus closer to 3%. The same logic applies to the interest deductibility of mortgages. Meanwhile, the government tells us that they are doing great things for Joe Six Pack and Joe MBA because the first $1,000,000 of mortgage interest is deductible. Great, but the reality is that for Joe Forbes 400 there is no $1,000,000 limit. He just borrows against his stock, or might even borrow unsecured, pledging no specific collateral at all. This is just more of the same old velvet rope treatment that ensures that the rich get richer and the poor get poorer.