Buy, Borrow, Die

Here's the strategy in three steps:

Buy: acquire appreciating assets — stocks, real estate, art, founder shares. These don't generate ordinary income; they appreciate in value. As long as you don't sell, that appreciation is not a "realization event," which means no tax.

Borrow: instead of selling assets to fund your lifestyle (which would create taxable income), borrow against them. Banks happily lend at low rates against blue-chip stock or real estate equity, often 1-3% above prime. This loan is not income — it's debt, which is not taxable. You now have cash to spend, your assets keep appreciating, and the IRS sees nothing.

Die: when you pass, your heirs inherit the assets at "stepped-up basis." Your $1 million in Oracle stock that grew to $1 billion gets reset to a $1 billion cost basis on transfer. Heirs sell some to pay off your loans, owing zero capital gains because the basis equals the price. The accumulated lifetime gain — $999 million in this example — is never taxed by anyone, ever.

Operate the strategy below.

Why this is legal

Three rules combine to make this airtight:

The realization requirement (1920, Eisner v. Macomber): you only owe capital gains tax when you actually sell an asset. Unrealized gains are not income, even if your wealth has grown by billions.

Borrowing is not income (Internal Revenue Code §61): a loan is offset by an obligation to repay, so it's not taxable receipt of income. This is sensible for ordinary people but explosive for those whose assets are large enough to borrow against indefinitely.

Stepped-up basis at death (IRC §1014): when you die, your heirs' cost basis in inherited assets is set to fair market value at date of death. Lifetime appreciation is wiped clean for tax purposes. This rule alone is estimated to cost the Treasury $40 billion+ per year.

How widespread is this?

Pretty widespread among the very wealthy. Securities-Based Lines of Credit (SBLOCs) at major brokerages totaled an estimated $400+ billion in outstanding loans as of recent reports. That's the Buy-Borrow-Die strategy made explicit as a banking product. Goldman Sachs, Morgan Stanley, JPMorgan all have private banking divisions whose entire job is helping ultra-high-net-worth clients implement this.