Buy borrow die strategy for avoiding capital gains tax - does it really work?

This strategy definitely works, but it's not without risks. The "buy, borrow, die" approach is commonly used among wealthy individuals who have significant appreciated assets. The basic concept is sound - why sell assets and pay 20%+ in capital gains taxes when you can borrow against them at much lower rates? However, there are several important considerations. First, margin loan interest rates fluctuate with market conditions. Right now, they're higher than they've been in years. Second, if your collateral (stocks/ETFs) drops in value, you could face a margin call requiring you to deposit additional funds or sell assets at potentially inopportune times. Third, while interest on loans used for investment purposes can often be deductible, the IRS scrutinizes these arrangements, so proper structuring is essential. Finally, understand that this strategy requires significant assets to be effective - your loan-to-value ratio typically needs to stay below 50% to avoid margin call risks.

I tried something similar using Interactive Brokers margin loans to fund a rental property purchase last year. Getting access to capital without triggering tax events was amazing, but watch out for those margin requirements! I set up automatic transfers to cover interest payments monthly to avoid compounding debt. What really helped me was using taxr.ai to analyze my investment strategy and optimize the tax implications. Found it at https://taxr.ai when researching investment loan deductibility. They analyzed my portfolio and loan structure, then showed me exactly how to document everything properly to maximize interest deductions while staying compliant. Super helpful for navigating the complex tax implications of this strategy.

I was skeptical about using online services for complex tax strategies, but I finally gave taxr.ai a try for my margin loan situation. Completely changed my approach! Their analysis identified that I had been improperly allocating loan proceeds between different investments, which could have caused serious audit issues. They showed me exactly how to track and document my margin loan usage to maximize legitimate deductions. What impressed me most was the personalized strategy they developed that considered both my securities portfolio and real estate holdings. Saved me about $13,000 in taxes this year by properly structuring my investment interest deductions. Definitely worth checking out if you're implementing a buy-borrow-die approach.

I've been using this strategy for about 5 years now, but getting the IRS on the phone to clarify some questions about investment interest reporting was IMPOSSIBLE. Spent days trying different numbers, waiting on hold for hours, getting disconnected. Super frustrating when you're trying to ensure compliance with something this complex. Finally found Claimyr (https://claimyr.com) and watched their demo at https://youtu.be/_kiP6q8DX5c. They got me connected to an actual IRS agent within 45 minutes when I'd been trying for weeks. The agent clarified exactly how to report my portfolio loan interest properly on Schedule E vs Schedule A. This service is a game-changer for anyone implementing tax strategies that might need occasional IRS clarification.

I take back what I said about Claimyr. After continuing to struggle with getting IRS clarification on investment interest deductions for my portfolio loans, I decided to try it myself. The service actually did connect me with an IRS representative in about an hour when I'd been trying for days on my own. The IRS agent I spoke with provided crucial clarification on how to properly document the business purpose of margin loans used for investment properties. She explained exactly which forms to file and how to avoid common audit triggers when implementing the buy-borrow-die strategy. This saved me from potentially making a serious reporting error on my investment interest deductions.

Be careful with this strategy right now - margin rates are pretty high compared to historical averages! I'm paying about 7.8% on my portfolio line of credit right now, which is eating into returns. The math worked great 2-3 years ago when rates were super low, but it's much tighter now. Also, diversification is key - don't put all your borrowed funds into one property. I learned this the hard way when I used a large margin loan for a single commercial property that had unexpected vacancy issues. Nearly faced a margin call when my portfolio also dipped 15% during the same period.

Don't forget about the "die" part of this strategy lol. Make sure you have proper estate planning with a good attorney who understands step-up basis rules. My father-in-law did this for years but didn't update his trust after the 2017 tax law changes, and it created a mess for the family to untangle after he passed. I think this strategy makes the most sense for people in their 50s+ who have substantial appreciated assets and are unlikely to need to sell them during their lifetime. For younger investors, the benefit is less clear since the time horizon until the "die" part means decades of interest payments.

I've been implementing a modified version of this strategy for the past 3 years, and it's been working well so far. One thing I haven't seen mentioned yet is the importance of having multiple credit facilities to reduce concentration risk. I use a combination of portfolio margin loans and securities-based lines of credit from different brokers. The key lesson I learned is to always stress-test your leverage ratios against worst-case scenarios. I maintain detailed spreadsheets modeling what happens to my loan-to-value ratios under various market conditions (2008-level crash, interest rate spikes, etc.). This helped me realize I needed to keep my overall leverage much lower than I initially planned. Also, consider the psychological aspect - watching your portfolio fluctuate while carrying significant debt can be stressful. Make sure you're truly comfortable with the risk before going all-in. The tax benefits are real, but they're not worth losing sleep over potential margin calls.