I watched an instagram video that got me very curious about this possible tax evasion method. (Link at the end)
Say I own shares of a company, which I bought for an insignificant amount compared to their current value (ie. Assume the capital gains rate of 20% is applied in full to these share prices upon liquidation).
Say I want to buy a $200.000 Ferrari. Instead of selling my shares (and paying 20% taxes on it), I can get a loan for $200.000 and use my shares as collateral.
By defaulting on the loan, the bank may collect the $200.000 (plus late payment fees, default fee) in share values.
In this scenario, is the 20% capital gains tax considered on the claim of the collateral by the bank? Because if I were to sell my stocks, I would need to sell $250.000 worth of stocks to have $200.000 after taxes to pay for the car. By defaulting on the loan, it seems I’m able to “skip” the capital gains taxes.