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A Loophole for Poor Mr. Paulson

1 pointsby telotortium10 months ago

1 comment

telotortium10 months ago
Generally, the US government pays far less for high-level employees than you can earn in the private sector. But if you&#x27;re extremely rich, there is a little-known benefit. Conflict-of-interest rules for government positions allow government employees subject to them to sell assets and reinvest them in cash&#x2F;Treasuries&#x2F;mutual funds&#x2F;ETFs without paying capital gains taxes upon selling those assets. The tax is just deferred - you&#x27;d still have to pay capital gains taxes when selling the new assets, with the basis being the original purchase price of the assets you were forced to sell.<p>So the upshot is that it makes sense for extremely rich people in private industry to take government positions where there would be a conflict of interest with their previous company. This allows them to diversify their assets in a tax-efficient manner.<p>When you die, the basis for capital gains is reset or &quot;stepped up&quot; to the current price of the assets upon death, which means your heirs or estate can immediately sell the assets completely tax-free. This doesn&#x27;t differ between diversified and non-diversified assets. But taking a government job allows extremely rich people to get out of a concentrated asset position, with the risk inherent to a single stock&#x27;s performance over decades, and into the much more predictable world of diversified Treasuries or stock index ETFs.