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Comment by nodesocket | Hacker News Reader

I find it somewhat funny that Propublica articles keep on making the front page, even though they have a clear very left leaning bias. Just look at the last hit piece on Peter Theil[1] and his use of a roth IRA (which is completely legal and just savvy finance).

[1] https://news.ycombinator.com/item?id=27743427

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Selling yourself undervalued assets into your IRA is not legal. Thiel sold his roth IRA paypal stock for much less than it was valued by his funders.

At the time that Thiel purchased the shares, PayPal hadn't been funded. The company was worth $0 on paper.

> The company was worth $0 on paper.

This is only true if you assume that everything involved (his time, knowledge, planning, etc.) had no value. Even if it would be unreasonable to predict how valuable it’d become, $0 is hard to defend.

Ok, I have put a lot of my knowledge and planning into my LLC. Wanna buy it for a bargain price of $1000? Sure, it has no assets, but think of all the knowledge and planning I put into it.

Have you already raised funds, as he had? Are you aware of major additional investments pending, as he was? Do you have business deals in progress, as they did? There’s a reason why their own SEC filings described those shares as being issued below fair value.

A simple fix for this would be to prevent private holdings from being placed into a Roth since independent valuations are hard to establish without market data but it’d be even better to simply cap the tax-free gains as suggested - if you accumulate millions in returns, paying taxes on the portion over n million is fine because you’ve still been phenomenally lucky and will retire wealthy.

Sorry, has Thiel already raised funds before adding stock to IRA, and nevertheless didn’t use the 409a value? Where did you get this information from? I see people claim this, but I have not seen any source for it.

The proPublica article says that paypal raised half a million dollars less than a month after he sold himself the shares. It raised millions more that year. Peter absolutely had been given a valuation by the venture capital firms when he sold himself the shares, deals like that don't suddenly materialize in less than a month. We can get into semantics about if paypal was actually worth what the firms were about to pay, but I think it's pretty clear that Peter committed fraud by selling himself shares for far less than he knew them to be worth.

This isn't a "I feel like these are worth a lot" scenario. This is a "we'll give you half a million dollars in a couple weeks" scenario and then Peter undercut that valuation.

I guarantee you he wouldn’t have transferred it to you for $1 despite the fact that you claim that’s well in excess of its value

Thiel personally considered Paypal to be very valuable, and he turned out to be right. But his personal opinion about how much the firm was (going to be) worth is not the same thing as the actual value of the firm.

Tim Cook might think that AAPL is worth $1000 a share, but it's not against the law for him to fill his IRA with Apple shares.

It would, however, be against the law for Cook to claim $20,000 worth of shares were $2,000 so he could stay under the limit.

The same is true for Thiel: a private company doesn’t have such an easy way to document market value but he had insider knowledge suggesting that $0.0001/share was low, as their own SEC filings acknowledged. I would prefer that the fix be to set a tax-free cap (e.g. pay capital gains on returns over $10M) but I suspect that kind of example will get the most attention because it’s pretty clear that he low-balled it and even if that’s perfectly legal it won’t seem fair to the vast majority of the population who never have access to pre-IPO shares, much less the ability to claim their own valuation.

Where did you get this from? All I have seen is that he put it into IRA when it was worth very little, as all early stage startups are. Do you mean he used price below 409A valuation or something like that?

They are not arguing that he did something illegal. They are arguing that the system is biased toward billionaires. "Savvy finance" is only available to those that can afford savvy accountants and tax people.

“Savvy finance” would be something like using standby letters of credit to perform off the books international asset transfers.

Claiming depreciation on your tax return is something I do with all my home office equipment every year.

Just because it's legal doesn't make it ethical

I concur with this. The point of the article isn’t to say he doing anything illegal. It is to show the rest of the population how screwed up the tax code is to allow such things to occur. It would be trivial to fix. Put an upper limit on what can be held in a tax advantaged account. $5 million. $10 million. Whatever. Not $5 billion. That wasn’t the original intent of the program.

Right, and often it takes journalists describing the legal, unethical, behavior before we decide to make it illegal.

If we aren't supposed to write negatively about anything someone does as long as it is legal, how would we ever come around to deciding to making something illegal?

You can read them as hit pieces, or as investing advice :)

can you further explain why you find left leaning bias and HN front page connection funny?

Thats the part of your comment I am confused by...

People sometimes use that phrase to mean “suspicious,” (e.g. “I have a funny feeling”) or to imply black humor.

Because, it is hypocritical. Has a right leaning article ever made the front page of HN? This false narrative of freedom of thought and diversity of ideas on HN is just patently false. A few people with agendas flag and downvote stories they don’t like or align with and oppress valid thoughts.

to contextualize your response, I think two links might help:

1) the discussion of political detox week from 2016:

https://news.ycombinator.com/item?id=13108404

2) The 2019 new yorker profile on HN/dang/mod team

https://www.newyorker.com/news/letter-from-silicon-valley/th...

Key quote: In an Emacs file, Gackle collects a list of contradictory statements that people have used to describe Hacker News. (“SJW cesspool”; “a haven for alt-right and libertarian people”; “If you don’t support neoliberal fantasies, your comments probably aren’t welcome here”; “The only thing is left is to change Hacker News icon to Che Guevara emblem.”)

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