Shaan Puri entrepreneur frameworks | My First Millions

What is the Buy, Borrow, Die Process? | Aaron Puri on My First Million

Check out My First Million Podcast Episode Page & Show Notes.

Key Takeaways

  • How do people get away with paying no taxes?
    • They buy real estate and use depreciation to offset their taxes
      • If you buy a residential property, you can depreciate that asset for 27.5 years 
      • If you buy a commercial property, you can depreciate it for 39 years 
  • Another way to avoid paying taxes is the buy, borrow, die strategy:
    • Buy an asset
    • Borrow money against it (it’s considered debt so you pay no taxes)
    • Put that money in a trust and when you die, you can pass it down to your kids without paying an inheritance tax 
  •  Most recyclables are actually thrown away
    • 9% of plastics actually get recycled
    • 91% of plastics gets sent to a landfill 
      • If anyone could invent a superior or more recyclable material for plastic bottles, it would likely make you a fortune

Intro

  • Aaron Puri is Shaan’s brother-in-law 
  • Hosts: Shaan Puri (@ShaanVP) and Sam Parr (@theSamParr

Books Mentioned

How To Pay Zero Taxes

  • Aaron recently went down a rabbit hole to try to figure out how people avoid paying taxes
    • He found Donald Trump and Jared Kushner, both basically paid nothing in taxes even though they’re worth hundreds of millions of dollars
      • “There is a way to pay no federal or state income taxes” – Aaron Puri
  • How do people get away with paying no taxes?
    • They buy real estate and use depreciation to offset their taxes
      • If you buy a residential property, you can depreciate that asset for 27.5 years 
      • If you buy a commercial property, you can depreciate it for 39 years
  • In addition to depreciation, investors can use cost segregation to reduce their taxes and increase the cash flow of a property

Buy, Borrow, Die Process

  • Another way to avoid paying taxes is the buy, borrow, die strategy:
    • Buy an asset
    • Borrow money against it (it’s considered debt so you pay no taxes)
    • Put that money in a trust and when you die, you can pass it down to your kids without paying an inheritance tax 
  • Example: Larry Ellison has a $10 billion line of credit that he paid zero taxes on and can use the money however he wants
    • When Larry dies, he can write in his will to transfer the remaining wealth to his children through a stepped-up basis and avoid the inheritance tax
      • This process of buy, borrow, die can be repeated generation after generation

An Interesting Way of Buying Equity In A Startup

  • Harvey Multani is an investor who helps create employee-led SPVs (special purpose vehicles)
    • In other words, he helps employees buy equity in the company’s next funding round
  • Chris Sacca did something similar where he bought Twitter shares from employees and eventually accumulated a big enough stake that made him a billionaire
    • This works because sometimes employees want to sell their shares because they need cash, and on the other side, investors want to buy equity in a company that’s still private

Buy Nothing Project

  • The Buy Nothing Project is a grassroots community with 1.2 million participants in 25 countries and has 6,000 volunteers
    • The organization offers people a way to give, receive, and borrow items through a worldwide network of hyper-local gift economies 

The Waste Management Industry

  • Most recyclables are actually thrown away:
    • 9% of plastics actually get recycled
    • 91% of plastics gets sent to a landfill 
      • If anyone could invent a superior or more recyclable material for plastic bottles, it would likely make you a fortune
  • To learn more about the waste management and materials industry, Sam recommends reading Sons of Wichita: How the Koch Brothers Became America’s Most Powerful and Private Dynasty by Daniel Schulman  
  • Often times, the more the boring industry, the easier it is to make money in it
    • The more fun the industry, the more competition and harder it will be to succeed

Additional Notes

  • In life, it’s important to know what you want so you know what needs to get done to get there
My First Million : , , , ,
Notes By Alex Wiec

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