Breaking Business News | Breaking business news AM | Breaking Business News PM

Why You Can’t Turn Your Roth IRA Into a Billion-Dollar Tax Shelter

1 Jul 2021

ProPublica is a nonprofit newsroom that investigates abuses of power. The Secret IRS Files is an ongoing reporting project. Sign up to be notified when the next installment publishes.

Last week, ProPublica published the story of how PayPal co-founder and tech investor Peter Thiel was able to turn a Roth IRA initially worth around $2,000 into a jaw-dropping $5 billion tax-free retirement stash in just 20 years.

Never miss the most important reporting from ProPublica’s newsroom. Subscribe to the Big Story newsletter.

The story is even more remarkable because Congress created the Roth IRA in 1997 to encourage middle-class Americans to save for their golden years. Most Americans have struggled to do even that; the average account was worth about $39,000 in 2018. But Thiel and other billionaires have managed to turn their mundane Roths into giant onshore tax shelters.

Thiel was able to launch his Roth into the stratosphere through a complicated strategy involving the purchase of nonpublic stock at bargain prices — the kind of deal most people can’t access. Experts say it risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. (Thiel’s spokesman didn’t respond to questions.)

Other ultrawealthy Americans have used different means to build Roths worth tens or hundreds of millions of dollars. Senate Finance Chairman Ron Wyden is now looking at how to end the use of the Roth as “yet another tax dodge that allows mega millionaires and billionaires to avoid paying taxes.”

How are they able to do it while you can’t? Check out our explainer of one way the Roth works for the ultrawealthy and not for you.

Help Us Report on Taxes and the Ultrawealthy

Do you have expertise in tax law, accounting or wealth management? Do you have tips to share? Here’s how to get in touch. We are looking for both specific tips and broader expertise.

James Bandler and Patricia Callahan contributed reporting.

Read the full article here.
This content was originally published by Propublica. Original publishers retain all rights. It appears here for a limited time before automated archiving.By Propublica

Covid-19 – Johns Hopkins University

Download brochure

Introduction brochure

What we do, case studies and profiles of some of our amazing team.


Do NOT follow this link or you will be banned from the site!