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June 26, 2021 07:34 pm

Peter Thiel Turned a $6,000-a-Year Retirement Account Into a $5 Billion Tax Shelter

Remember when ProPublica said they'd obtained the tax returns of some of America's richest people? Now they're reporting that Peter Thiel turned a small retirement account — the kind meant to help middle class investors — "into a $5 billion tax-free piggy bank."Billionaire Peter Thiel, a founder of PayPal, has publicly condemned "confiscatory taxes." He's been a major funder of one of the most prominent anti-tax political action committees in the country. And he's bankrolled a group that promotes building floating nations that would impose no compulsory income taxes. But Thiel doesn't need a man-made island to avoid paying taxes. He has something just as effective: a Roth individual retirement account. Over the last 20 years, Thiel has quietly turned his Roth IRA — a humdrum retirement vehicle intended to spur Americans to save for their golden years — into a gargantuan tax-exempt piggy bank, confidential Internal Revenue Service data shows. Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall. To put that into perspective, here's how much the average Roth was worth at the end of 2018: $39,108... What's more, as long as Thiel waits to withdraw his money until April 2027, when he is six months shy of his 60th birthday, he will never have to pay a penny of tax on those billions.... While most Americans are dutifully paying taxes — chipping in their part to fund the military, highways and safety-net programs — the country's richest citizens are finding ways to sidestep the tax system. One of the most surprising of these techniques involves the Roth IRA, which limits most people to contributing just $6,000 each year... Yet, from the start, a small number of entrepreneurs, like Thiel, made an end run around the rules: Open a Roth with $2,000 or less. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value. Pay just fractions of a penny per share, a price low enough to buy huge numbers of shares. Watch as all the gains on that stock — no matter how giant — are shielded from taxes forever, as long as the IRA remains untouched until age 59 and a half. Then use the proceeds, still inside the Roth, to make other investments. ProPublica argues Thiel's move alone "deprived the U.S. government of untold millions in tax revenue. Perhaps billions." But he's not the only multi-millionaire they found stashing vast sums into untaxed accounts:Ted Weschler, a deputy of Warren Buffett at Berkshire Hathaway had $264.4 million at the end of 2018.Hedge fund manager Randall Smith, whose Alden Global Capital has gutted newspapers around the country, had $252.6 million in his.Warren Buffett, one of the richest men in the world and a vocal supporter of higher taxes on the rich: $20.2 millionFormer Renaissance Technologies hedge fund manager Robert Mercer: $31.5 million

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