Individual Economics in the Age of COVID-19

[Melkerson]

@anon12304106

If the stock is unrestricted and saleable, pretty low interest rate. It is a pretty good loan to make, you are collateralized by the stock and put in a 40 percent margin or w/e and can just sell it down if you have to and get your money back. Usually still has recourse to other assets. I looked at this at one point for very different reasons (and like 9 less zeroes) but the stock could only be traded in trading windows so couldn’t get a loan. Before the bank knew that complication were dying to do it at a very low rate.

Also the taxes not as much of an issue if the margin call comes into play as the stock isn’t as appreciated at that point.

This interest was definitely deductible before the last tax reform, not sure if it is now.

I’m gonna reply in this thread since it seems like we’re getting way off topic for the other one.

You might need to dumb this down a little more for me.

1. Bolded doesn’t make any sense. I would assume that the stock has appreciated substantially over the basis at the time you take the loan. If the stock hasn’t appreciated, then there is no tax avoidance to be had.

2. What does this mean: “put in a 40 percent margin”. I’m assuming it means they will loan you up to 40% of the value of your stonk. Is that right?