15. Never Pay Capital Gains Tax

Income tax requires income to tax. If I’ve maneuvered into no income and net debt, where’s the tax? Taxes are the invisible killer of wealth. Every time you sell a stock at a profit, the government takes a share — in the U.S., short-term capital gains are taxed at ordinary income rates up to 37%; long-term capital gains (held > 1 year) at 15–20%; high earners add 3.8% NIIT. Taiwan currently has no capital gains tax on listed stocks, but foreign income above a threshold enters the AMT calculation. Taxes are unavoidable reality — unless you simply do not generate taxable income. CLEC’s strategy does exactly this: don’t sell → no realized gains → no taxable income → no tax owed. This is not tax avoidance or evasion — it is fully legal zero-tax strategy, a basic principle that holds under every tax code in the world.

Buy-Borrow-Die (买借传): The Complete Tax-Free Loop

Pairing “never sell” with pledging + legacy yields a complete, legally tax-free capital-gains loop:

Buy: with disposable cash, buy NASDAQ-100 index fund. Buying creates no tax event.
Hold + appreciate: paper appreciation is “unrealized gain”; whether up 10% or up 100×, it does not constitute taxable income.
Pledge-borrow: when you need money, don’t sell — pledge stock and borrow from the bank. The borrowed money is debt, not income — no tax obligation. Interest expense may also qualify for deductions in some jurisdictions.
Live: use the borrowed money to live and enjoy life; assets keep growing in the index fund at a rate far above the borrowing rate.
Legacy (U.S.): assets and debts pass to heirs. The U.S. tax code’s “Step-up in Basis” resets the heirs’ cost basis to the market value at inheritance. If your original cost was $1 million and at inheritance the value is $100 million, that $99 million of appreciation pays not a cent of tax — provided you never sold. String the five steps: buy → hold-and-appreciate → pledge → live → inherit — zero capital- gains tax throughout. No need to hire expensive tax lawyers; no need to set up offshore trusts or shell companies — you only need to do one extremely simple thing: don’t sell.

The Truly Rich Often Look Poorest on Tax Returns

This is the most paradoxical scene in the world of wealth: someone with hundreds of millions in assets, because he never sold, has no income; because he pledge-borrows to live, his books show a debt position. The tax authority opens his return and sees: no stock sales, no realized capital gains, just interest payments to claim — this person is, legally, a “poor man.” Fully legal, fully compliant, fully airtight. The flip side — people who chase highs and cut lows every day, trading constantly — every sale contributes tax revenue to the government, every “profit-taking” cuts their compounding base. In the end, frequent traders may pay more in tax than they make.

The Hidden Tax Trap of Annuities

A specific caution about a trap often overlooked: annuities. On the surface, an annuity provides stable retirement cash flow — but annuity income is taxable income. Worse, if you also hold a Traditional IRA and plan to convert to Roth, annuity income will push your taxable income way up that year, making the Traditional → Roth conversion much more expensive. Anyone who buys an annuity is essentially unable to efficiently convert Traditional → Roth in retirement — annuity income alone pushes you into a high bracket. Annuities are not only low-return and illiquid; they cause chain damage at the tax-planning layer. The best tax strategy is the simplest investing strategy: buy, hold, never sell.

───────────────────────────────────────

Key Points

One, no sale means no realized gain, no realized gain means no taxable income, no taxable income means no capital-gains tax. This is a basic principle valid under every tax code in the world, fully legal and compliant — and the most powerful tax strategy. Two, cash from a pledge loan is debt, not income or gain, generating no tax obligation. The truly wealthy often look poorest on tax filings — because they never sell, so they have no income, only growing assets and reasonable debt. Three, annuity income pushes up taxable income and severely disrupts Traditional-to-Roth IRA conversion planning — an overlooked but devastating tax trap. The combination of “never sell” and “pledge-borrow” lets you pass assets and debts to your heirs together, and in the U.S. enjoy step-up in basis, achieving zero tax across your whole life.

Iron Law V: Stay Away from Noise and Fraud

● Don’t Listen to Experts ● What NOT to Buy ● Beware of Fraud The summer insect cannot speak of ice.

15. Never Pay Capital Gains Tax

Buy-Borrow-Die (买借传): The Complete Tax-Free Loop

Pairing “never sell” with pledging + legacy yields a complete, legally tax-free capital-gains loop:

Buy: with disposable cash, buy NASDAQ-100 index fund. Buying creates no tax event.
Hold + appreciate: paper appreciation is “unrealized gain”; whether up 10% or up 100×, it does not constitute taxable income.
Pledge-borrow: when you need money, don’t sell — pledge stock and borrow from the bank. The borrowed money is debt, not income — no tax obligation. Interest expense may also qualify for deductions in some jurisdictions.
Live: use the borrowed money to live and enjoy life; assets keep growing in the index fund at a rate far above the borrowing rate.
Legacy (U.S.): assets and debts pass to heirs. The U.S. tax code’s “Step-up in Basis” resets the heirs’ cost basis to the market value at inheritance. If your original cost was $1 million and at inheritance the value is $100 million, that $99 million of appreciation pays not a cent of tax — provided you never sold. String the five steps: buy → hold-and-appreciate → pledge → live → inherit — zero capital- gains tax throughout. No need to hire expensive tax lawyers; no need to set up offshore trusts or shell companies — you only need to do one extremely simple thing: don’t sell.

15. Never Pay Capital Gains Tax