# 1% Tax Strategy - Credit Lines



## tygrus (Mar 13, 2012)

I was casually reading what the 1% do to minimize taxes short of transferring money to the caymans.

What surprised me is that many used lines of credit to finance their lifestyles thus taking no direct income that can be taxed. 

My line of credit might last for a year or two but after that I would be back to square one. I wonder how they keep this going on for a long time?

http://www.salon.com/2013/04/12/10_tax_dodges_that_help_the_rich_get_richer_partner/


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## OptsyEagle (Nov 29, 2009)

tygrus said:


> What surprised me is that many used lines of credit to finance their lifestyles thus taking no direct income that can be taxed.


I would bet less then 1% of the 1% would ever do that. As you said, in order to spend the amount of money your net worth would allow it would create a very large outstanding debt.

Whatever you were reading was just a talking head.

Most rich people pay more tax in one year then 10 of us will pay in a lifetime. But that doesn't make for good reading and it doesn't bring customers to tax advisors...so they make up these ridiculous strategies.


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## HaroldCrump (Jun 10, 2009)

Can you post a link to whatever you were reading?

Just based on what you say, it does not seem accurate.
LOCs used for consumption expenses are not tax deductible.
Only LOCs used for investment purposes are tax deductible.

It may be possible that some small business owners/sole proprietors may be using their LOCs to purchase cars and homes, which are partially registered for business use, and then writing off that portion of the costs.
But surely that would be a very marginal cases, and does not signify truly wealthy 1% type of people.


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## Eclectic12 (Oct 20, 2010)

Hmmm ... the link is talking about Mitt Romney so it appears to be US based.
This likely means that some or all of the actions won't fly in Canada.

To name one difference between the US and Canada tax systems, the US homeowner gets to write off their mortgage interest where a Canadian homeowner does not.

The "borrowing" example from the link is a company owner whose employee finds billions in oil. The employee pays income tax on his bonus where the owner borrows from the *against the oil* to buy cars etc. 

This is all pie in the sky because the bank is going to want minimum payments - which will mean the company owner will have to declare some income, just to pay the minimum back to the bank.


Cheers

*PS*

Definitely US based as it says "The current US income tax system doesn’t impose taxes on wealth."


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