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Comment by jklein11 | Hacker News Reader

>But if you work for a company <i>owned mostly by your Roth IRA</i>, that's easily abused.

As I understand it, you can't own a company that you(or a relative) own a controlling interest in with your IRA. I can see the sense in this because if own 20% the person(people) who own the other 80% have an incentive to make sure I'm not playing any kind of games with the finances.

In the case of Thiel, it seems like he took $2000 and made a moonshot investment in Paypal. At that point his investment could have just as easily went to $0 as it was to hit $5 billion. He took the risk, why shouldn't he have gotten the reward?

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I think the problem is these IRAs were not designed to shield the super rich from taxes. It's meant to help the average person. Implemented properly it should have an upper limit, probably under a million dollars. Letting it grow to five billion tax free is a loophole that shouldn't exist and does not benefit society at large.

> He took the risk, why shouldn't he have gotten the reward?

And he should get the reward, minus capital gains tax.

This country provided an environment for that investment to turn into five billion. He couldn't have done the same thing in Somalia, or Vietnam, or Greece. Why shouldn't it reap its share?

Nearly everyone else pays their fair share of taxes.

He invested a tax advantaged $2000. If he had invested that $2000 in the S&P 500 in 1995 he would have a tax advantaged $25,000. He would have been out that tax advantaged $25,000 if paypal didn't take off. Instead he decided to make a much longer shot bet and for him it paid off.

I can understand adding legislation that would tax distributions on Roth IRA's for billionaires. Thiel would be fine if he had to pay taxes on that windfall.

I just think that it is a mischaracterization that he isn't paying his fair share of taxes. To me, it doesn't seem like he did anything wrong. He took advantage of a system that is accessible to everyone.

The issue is as far as people can tell he illegally invested 2000$ from an IRA. You’re not allowed to invest in a company with an IRA if:

an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G) https://uscode.house.gov/view.xhtml?hl=false&edition=1994&re...

Being the CEO clearly qualifies. That said, the statute of limitations means you can often get away with things if they go unreported for long enough. It may be he’s currently in the clear.

The article says he was audited.

> In 2011, Thiel caught the attention of the IRS. The agency launched an audit, tax records show. The records don’t spell out what the IRS was looking at or if it involved Thiel’s Roth. Whatever the case, the audit was closed years later and Thiel didn’t owe any more taxes, tax records show.

He was CEO of PayPal until 2002, which means in 2011 this would presumably be past the statute of limitations for many things. It’s unclear if this falls under Tax Fraud or not.

> That said, the statute of limitations means you can often get away with things if they go unreported for long enough.

What I find most interesting in regards to this is that by the time there was any reportable gain (2002 sale), and thus any reason it would even be looked at, the 3 year statute of limitations would be up on the initial prohibited transaction. Which is... interesting.

> Nearly everyone else pays their fair share of taxes.

It seems the whole point of these Roth IRA is so people don't have to pay their fair share of taxes. I'd blame the government for creating that.

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