How Do Billionaires NOT Pay Taxes?

Added: 2026-05-05

[00:00:00]How do billionaires not pay taxes? Well, it's because they don't sell anything.

[00:00:04]Well, at least not the assets that would trigger a massive tax bill. Take Elon Musk for example. When he bought Twitter for $44 billion, he didn't sell his Tesla stock to do it because if he sold it, he'd owe capital gains on every single share. So, instead, he borrowed against it. Now, here's how it works.

[00:00:23]Elon goes to the bank and says, "Hey, I have billions of dollars in Tesla stock.

[00:00:27]Can you loan me 12.5 billion?" And the bank says, "Sure, take it. We know that you're good for it." That borrowed money is in tax because it's a loan, not income. So Elon gets the cash he needs, the bank gets collateral, and the IRS gets nothing. Now, here's the best part.

[00:00:42]You don't need to be a billionaire to use this strategy. It's called a securitiesbacked line of credit. I bought Apple when it was $5 a share, and I never sold a single stock. I just borrow against my portfolio when I need the cash. The greatest hack in wealth creation is to become your own bank so you can borrow from yourself.

[00:01:01]>> So this is accurate at the same time. I mean all of us are always asking okay well like who pays back the debt and that's the reality economically. You still have to be in some type of position to be able to make the debt payments. You can't just like keep taking on debt to pay debt right at some point that ends. But the general premise is correct. We want to avoid taxable events. Your most classic taxable event is going to be of course just selling something. you sell it, you get the money, you're like, shoot, the IRS is going to get some of this money. Uh, but the other type of taxable event that most people don't know about is when you take something out of a corporation and it has a what we call built-in game. So, if, for example, you have a piece of real estate, you've been depreciating that piece of real estate and it is worth a million, your basis now is $200,000, you have an $800,000 built-in gain. If you sold the property, everyone understands, okay, that's taxable. But what people don't understand is if you also take it out of a corporation, S corp or a CC corp, that also triggers the same tax as if you sold it, except now you are up a creek because you don't have any cash to cover it. You just have the taxable event. So that would be even more important to avoid. and fractual tax law from a tax attorney.