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> I have to either get money from somewhere Take out another (slightly larger) loan against the stock. As long as the stock grows faster than the interest rate
by spelledwrong 18d ago
> I have to either get money from somewhere
Take out another (slightly larger) loan against the stock. As long as the stock grows faster than the interest rate, you should be able to chain loans together forever. You need to only borrow a portion of the value of the collateral to provide a buffer from volatility, but that should also mean the loan is very safe and thus at a low interest rate.
To close the loophole you would need to be able to tax borrowed money which creates its own set of dangers.
- atmavatar 17d agoAnother way to close the loophole would be to amend the tax code to realize the gains for any stock used as collateral, since the person obtaining the loan is already de facto realizing the gains for the sake of the loan.