I've been in the financial services industry for nearly twenty years. I'd like to think I've seen and heard about almost everything. I pursued higher end educational credentials to ensure that I was exposed to as much as I can to help my clients succeed.
The strategies I advocate... I did NOT learn in my RFC, ChFC, or CLU coursework.
In the financial group I'm a part of, the multiple CPAs didn't learn about this in "CPA school" either. The CLOSEST I heard of strategies like these... are from a book series written by Robert Kiyosaki called "Rich Dad, Poor Dad" and especially "Cashflow Quadrant", although admittedly Kiyosaki focuses primarily on the investment quantities and advantages of real estate. Many of them coincide with the advantages of life insurance wealth contracts.
Our strategies focus on the tax code as it relates to using Other People's Money through loans. In short, personal loans... are not taxable UNLESS you default on the obligation, the lender charges off the debt, and a 1099 form is generated for the difference on the amount still owed.
This Forbes article talks about that. I'll put the article link and images below along with a screen print of over 350 tax codes referenced in one of my subscription tools. Only ONE of these tax codes even references the word 'loans' (IRC section 221) and NONE of them use the word collateral.
Why not? Because a collateralized transaction is just a transfer of capital subject to a repayment agreement to another party... they are NOT classified as income. If they aren't classified as income, then it isn't subject to income taxation (generally speaking).
Lots to read. Enjoy!
This image showing Section 221 on "Interest on education loans" is the ONLY tax code that even references the word 'loans'.
