When the cash flow from the assets exceeds interest expense, you've cashed out the assets without incurring tax on your appreciated position and you can afford to pay the interest. As for principal, debt is largely not paid back these days, especially large bespoke debt secured by liquid and well-defined assets. The debt holders (lenders) get paid back after death of the borrower or they continue rolling the position and collecting their return (interest income). The only question in the lender's mind is how much leverage to grant on the underlying assets, e.g. blue chip stocks, and what to do in a liquidity crunch when rolling.

The strategy is called "Buy, Borrow, Die"

https://www.theatlantic.com/economy/archive/2025/03/tax-loop... (viewable by disabling JS)

There are a bunch of strategies here, but one people oft repeat is the "buy, borrow, die" approach. Where, they are kicking the can down the road, but the magic happens at the die step. When the borrower dies:

Your heirs inherit your stocks, with their cost basis reset to the current price. This means that they have zero appreciation of your purchase of $RIVN at $67, despite it being at $420. They can then sell the shares, to pay the loans, and not owe capital gains, because there are no gains. Additionally, at this step cash can be extracted for no gains as well if desired.

So you avoid taxes while alive by taking loans (not income), avoiding capital gains (never selling), and then gains evaporate through a stepped up basis. There are some exceptions here - estate taxes, etc with ways around them like trusts, but this is the general mechanism.

Its worth noting though, that its not ironclad. In a significant downturn you can be forced to liquidate and it will hurt (see the news on Musk right after X purchase). Additionally, while people talk about this as being super popular, realize that in practice people who take advantage of these strategies also still have millions in cash flow, so its not a true borrow only $0 tax lifestyle, they will use already taxed money to manage them as well.

You do. I think these loans are generally used for short term liquidity. For example if you want to buy a new house before selling your old one. You'd get a loan against your assets, buy the home with the loan proceeds, sell your old home and pay off the loan.

If your assets are growing faster than the interest it would also be possible to payoff the loan with a new (larger) loan, so you are still kicking the can down the road but eventually you would die and never need to pay the taxes while you were alive. I doubt this is done that often in practice, but who knows.

As mentioned in the article, death (and subsequent inheritance), solves this problem. Once you're dead, your tax situation changes significantly, and selling your assets to settle your debts is subject to estate taxes, not capital gains.

Sometimes its about the layers.

I.e. what kinds of loans can be tax deductible? To be clear theres decent effort into this, you can't just do a cash-out refi on a home, but loopholes exist for those who find it worth the effort.

A margin loan typically does not require any payments at all other than interest. Many loans are like this. Amortization for principal repayment is usually something you only find in personal or real estate loans

You repay with another loan. Repeat multiple times. And then you die.

This is the strategy that people follow.

This is what they call "buy borrow die" or some such. Buy an asset, borrow against it, die to reset the basis. Your estate will still have to repay the loans, but... that one part I don't really understand. Do they just refinance, taking a new loan against the newly valued asset?

This all seems to benefit from low interest rates. Was it a thing in the 90's? Or even the 80s when rates were much higher?

Yes, and when you do pay it's a lower "real" tax (due to inflation)

but you'd wait only long enough for a version that's good enough, not forever.

That’s the trick. Don’t live anywhere. Every other country taxes based on residency rather than citizenship. If you’re not a U.S. citizen you can just wander around the world living tax free regardless of your income. Don’t stay anywhere long enough to become a tax resident.

You can't reclassify profit as reinvestment to show zero net profit. (If you could every business would have an internal hedge fund or private equity business and would show zero net profit).

>As a business owner in the U.S. I can opt to reinvest all revenue back into the business,

Not entirely, no. Any of those reinvestments that count as capital expenditures aren't immediately deductible, but only on a throttled schedule, which is why the concept of depreciation exists in tax law:

https://news.ycombinator.com/item?id=15061439

As a business owner, if you provide labor to the business, you have to pay yourself a salary.