You’ve had those good stocks over the years but you’d like to take some profits. And maybe even one stock that has grown so much that you have a large position that makes you a little nervous. But you feel stuck. You don’t want to send thousands of dollars to IRS for the capital gains tax. Now there’s a new solution.
You can take advantage of the 90% stock loan program. There is a financial institution (not a brokerage house) who will provide you cash equal to 90% of the value of your stocks. The cash is in the form of a non-recourse loan. That means that even if your stock goes to 0, you owe nothing. The financial institution has only your stock as collateral. So you not only get a way to turn our stock into cash, you also protect yourself so that 10% is the most you can lose.
Let’s take an example. You have $1 million of stock that you provide as collateral. You get $900,000 in cash. No tax is due as you have not sold. The loans is for three years, at which time you can pay off the loan and take back your shares or you can just roll over the loan (and continue doing so indefinitely).
Let’s hypothetically say the stock value drops to $300,000. You can simply walk away with the $900,000 and at the end of three years let the financial institution keep your stock. Or take the opposite hypothetical possibility. Your stock value shoots up to $1.5 million. You could
I have never seen a “no lose” deal, but this comes close in that only 10% of your original capital is at risk. When you hold the stock, as you do now, 100% is at risk. So, the stock loan program allows you to decrease your risk in exchange for paying interest on a loan. In the case the stock declines, your 10% loss is all you owe (since the loan and the interest is non-recourse). If the stock rises, by more than the interest, you have gained net worth, have cash in your pocket and have reduced your risk.
If you have at least $500,000 in stock that you would like to protect or make liquid and avoid capital gains tax, please check off on the coupon for details.