Business School with Sharran Srivatsaa

Episode: How Billionaires Avoid Taxes

Date: December 30, 2025
Host: Sharran Srivatsaa

Episode Overview

In this episode, Sharran Srivatsaa reveals the main strategy that billionaires like Elon Musk, Jeff Bezos, and Mark Zuckerberg use to avoid paying taxes on their wealth—securities-based lending. Sharran draws on two decades of personal investing experience and high-level Wall Street insights to break down this surprisingly accessible tactic. He explains how you don't have to be a billionaire to leverage your investment portfolio for cheap, tax-advantaged liquidity, and reveals both the mechanics and risks of the approach, with real-life examples and clear, actionable steps.

Key Discussion Points & Insights

1. The Core Strategy: Borrow, Don’t Sell

• Securities-Based Lending is the Core Play

  • Billionaires avoid taxes by borrowing against their investment portfolios instead of selling and triggering capital gains taxes.
  • “This is how Elon Musk borrowed over $12.5 billion to buy Twitter without selling a single share of Tesla.” (02:00)
  • This strategy is not a loophole but a standard, legal wealth practice available to anyone with a sizeable investment portfolio.

• Who Uses It and How

  • Elon Musk: Used Tesla shares as collateral to borrow for Twitter purchase (19:30).
  • Jeff Bezos: Funds ventures like Blue Origin by borrowing against Amazon shares (21:15).
  • Mark Zuckerberg and Larry Ellison: Tap into wealth the same way.
  • "You don't need to be a billionaire to use this strategy. If you have an investment portfolio, you can do this on your own." (04:07)

2. Why Borrowing Beats Selling

• Avoids Triggering Taxes

  • Example: A $500,000 stock portfolio with a $400,000 gain would cost ~37% in taxes on gains if sold—about $150,000 lost instantly.
    (06:15)
  • Borrowing lets you unlock liquidity without selling or incurring tax.

• Cheap Capital

  • Interest rates on securities-backed loans are typically much lower than credit cards or business loans (5–7% vs. 12–35%) due to the collateral being held by the bank.
    (11:30)
  • "This is cheaper money because the bank has your collateral already." (12:40)

• Keep Your Investments Working

  • Remain invested and benefit from compounding gains even as you borrow for new opportunities.
  • "I borrowed $200,000 against my portfolio at 6% interest, used that to buy a property, and my stock in the portfolio kept growing." (14:12)

3. Mechanics: How Securities-Based Lending Works

1. Open an Investment Account

   • Use major brokerages: Goldman Sachs, Charles Schwab, Fidelity, Merrill Lynch, Morgan Stanley (28:40).

2. Collateral & Loan-to-Value (LTV)

   • Typical LTV: 40–70% depending on the portfolio mix (blue-chip stocks and bonds favored) (13:20; 31:10).
   • “If you have a million dollar portfolio, they can loan you between $400,000 and $700,000.” (13:45)

3. Draw Funds as Needed

   • It’s a line of credit: you only pay interest on what you actually draw.
   • No fixed repayment term; pay it back at your pace as long as collateral holds (33:25).

4. Tax Deductibility

   • Interest may be tax-deductible if used for investments or business purposes (15:08).
   • “Even the interest that I paid was tax deductible because I used it for investment purposes.” (14:35)

4. Key Risks and Cautions

• Margin Calls

  • If the portfolio value drops, your LTV spikes; the bank will demand you add collateral or pay down the loan.

  • "If you can't do either, they have the right to sell your stock to bring the loan back into compliance. That forced sale triggers taxes and losses. No fun." (23:29)

  • Best Practice: Never borrow more than 30–40% of your portfolio value, even if the bank offers more, especially to avoid forced sales during downturns (26:24).

• Interest Rate Risk

  • Rates are usually variable; if the Fed hikes, so do your payments.

• Investment Opportunity Risk

  • Borrowed money must out-earn the loan interest—don’t invest where returns are lower than the cost of capital (27:48).

  • “Every dollar has a job, but there’s also cost of capital… this gives you investing discipline!” (28:15)

5. Step-by-step Playbook to Use the Strategy

• Call your brokerage and ask for a securities-based line of credit (28:58).

• They evaluate your portfolio and set a credit line (29:15).

• You draw funds when needed, pay interest only on withdrawals (30:15).

• Pay down at your pace, keep compounding (33:25).

  • “Once you have a line of credit set up, it’s just there for you—you can use it again and again. It’s like having a bank inside your portfolio.” (34:00)

6. Big Picture: The Wealth Multiplier

• “The greatest hack in wealth creation is to become your own bank so you can borrow from yourself.” (35:22)
• The US tax code is designed to incentivize investment and economic growth—a feature, not a bug.

Notable Quotes & Memorable Moments

• “I’ve been using this strategy for 20+ years. I’ve almost never sold a stock. In fact, I hate selling stock. I am a buy and build kind of guy.” (35:00)
• “Your tax code is literally telling you where they’re going to penalize you, and where they’re going to incentivize you… This is by design.” (16:00)
• “Borrowing is not a taxable event. If you have investments that have appreciated, don’t sell them to get cash—consider borrowing against them.” (36:19)

Timestamps for Key Segments

• 00:00–03:00 — Introduction & high-level overview
• 04:00–08:00 — Why and how billionaires use this strategy
• 11:30–14:40 — Mechanics, interest rates, and personal real estate example
• 19:30–22:00 — Play-by-play billionaire examples: Musk, Bezos, Zuckerberg
• 23:00–26:40 — Understanding risks: margin calls, interest rate, investment returns
• 28:40–34:00 — Step-by-step how to use securities-based lending
• 35:22–END — Wealth mindset recap & final takeaways

Final Takeaway

You do not have to be a billionaire, or even a multi-millionaire, to use the same portfolio-borrowing tactics as the world’s richest. With prudent borrowing, disciplined investing, and the right risk management, you can keep your assets compounding while also funding new opportunities, minimizing taxes, and accelerating your own path to financial freedom.

For more actionable playbooks and resources, Sharran recommends visiting sharran.com.