Buy, Borrow, Die — Tax-Free Liquidity Architecture
A three-part framework that lets you access your wealth without selling and without paying taxes — by borrowing against appreciated assets instead of triggering capital gains, while preserving the step-up in basis at death that permanently erases all accumulated gains.
Three provisions of the tax code, each unremarkable on their own, create something remarkable when combined into a deliberate strategy.
Rule 1 — You only pay capital gains tax when you sell. Hold Apple stock for 30 years and watch it grow from $10,000 to $2 million — you owe zero tax on that $1,990,000 of gain until you sell. The gain is "unrealized" and the IRS has no claim on it while you hold.
Rule 2 — Borrowing is never a taxable event. When you take out a mortgage, draw on a line of credit, or borrow against your brokerage account, the proceeds are not income. They create a liability, but no tax is owed. A $1 million loan and a $1 million stock sale both put $1 million in your bank account — only the sale triggers a tax bill.
Rule 3 — At death, all accumulated capital gains are may be eliminated under current law. Under IRC Section 1014, heirs inherit appreciated assets at their current fair market value — the "step-up in basis." If you held that stock until death, your heirs inherit it worth $2 million with a $2 million basis. They can sell immediately with no capital gains tax. The $1,990,000 of gain you accumulated over 30 years disappears permanently at your death.
BUY: Accumulate appreciating assets and hold them — stocks, real estate, private equity, art, business interests. Resist the impulse to sell when you need cash. Every year you hold instead of sell, you keep more of the appreciation compounding for you rather than going to the government.
BORROW: When you need liquidity — for a real estate down payment, business investment, living expenses, a child's tuition — borrow against your appreciated assets rather than selling them. A Securities-Backed Line of Credit (SBLOC) typically provides 50–70% of your investment portfolio's value at competitive interest rates. Real estate cash-out refinancing extracts equity tax-free. You pay interest on the loan — but that interest cost is almost always far less than the capital gains tax a sale would have triggered.
DIE: The step-up in basis at death resets every asset to current market value. All accumulated capital gain — decades of appreciation — is permanently eliminated. Your heirs inherit the assets at current value, sell to repay any outstanding loans, and keep the rest. No capital gains tax on your lifetime of investment success.
This is not a gray-area strategy. It is the tax code functioning exactly as written. The step-up in basis is explicitly codified at IRC Section 1014 and was explicitly preserved by the One Big Beautiful Bill Act in 2025.
Illustrative only. Figures assume a 23.8% combined federal capital gains and net investment income tax rate and a proportionate allocation of basis. State tax and transaction costs are not modeled. Interest shown is first-year simple interest — borrowing costs compound and rates can change. Loan proceeds must be repaid, and a decline in portfolio value can trigger a collateral call requiring sales at unfavorable prices. Borrowing defers rather than eliminates tax; outcomes depend on basis, holding period, state law, and individual circumstances. Requires individualized tax, legal, investment, and lending review.
- No capital gains tax while holding — appreciation compounds completely unimpeded. A $5M portfolio growing at 7% for 20 years becomes $19.3M with no annual tax friction on unrealized gains.
- Loan proceeds are never taxable — $1M borrowed is $1M of purchasing power with zero tax cost, versus $1M of sale proceeds that might net only $762,000 after a 23.8% capital gains tax.
- Step-up in basis at death permanently erases all accumulated capital gain — decades of appreciation, zero tax on it at death. Heirs sell at current value with no gains tax.
- Outstanding loans are repaid from the estate using stepped-up assets — no capital gains tax on the assets used to repay the loans either, because their basis just reset to current market value.
- Investment interest expense may be deductible against investment income — if SBLOC proceeds are used to purchase other investments, the interest may offset investment income dollar for dollar.
- Estate tax still applies at death — the step-up eliminates capital gains tax on appreciation, but not the 40% estate tax on amounts above $15M. For large estates, this strategy must be coordinated with SLATs, IDGTs, and dynasty trusts to address the estate tax dimension.
- Interest on loans used for personal consumption (living expenses, cars, vacations) is not tax-deductible — only investment interest qualifies for the deduction against investment income.
- Margin calls are a real risk — if the portfolio declines significantly, the lender may reduce your available credit or require immediate repayment. This can force sales at market lows, triggering capital gains at exactly the wrong moment. Maintaining substantial cushion above the loan balance is essential.
- Congressional proposals to eliminate or modify the step-up in basis have appeared periodically — none have passed and current law explicitly preserves it, but it is a provision worth monitoring legislatively.
Identify which assets to hold for the strategy
We analyze your current portfolio to identify which positions have the highest unrealized gain relative to value — these are the candidates to hold under the buy-borrow-die framework. We coordinate with your financial advisor on investment positioning that minimizes unnecessary turnover and annual realized capital gains distributions inside the portfolio.
Shurek advises on tax positioning — financial advisor manages the investmentsEstablish the Securities-Backed Line of Credit
An SBLOC is established through your brokerage or financial advisor. Fidelity, Schwab, Morgan Stanley, Goldman Sachs, and most major custodians offer this product — typically 50–70% of portfolio value at variable rates tied to benchmark interest rates. The line is drawn upon only when needed; no interest accrues on undrawn amounts. We advise on how SBLOC proceeds will be used and what the tax treatment of the interest will be.
Financial advisor or brokerage establishes the SBLOC — Shurek advises on tax implicationsModel each borrow-vs.-sell decision in real time
Every time you need liquidity, we run a specific comparison: what does selling cost in capital gains tax vs. what does borrowing cost in interest over the expected hold period? For most positions with significant unrealized gain, the break-even is reached within 1 to 3 years of interest payments. We calculate this for each decision so you are making an informed choice rather than defaulting to selling because it feels simpler.
Shurek — on-demand when each liquidity need arisesCoordinate with the estate plan
Outstanding loans at death reduce the taxable estate — they are liabilities. But the estate must have sufficient liquidity to repay them without forcing a fire sale of illiquid assets. We model the estate's liquidity picture at various portfolio values and loan levels to ensure the plan remains coherent. This coordination happens with both the estate attorney (on the overall estate structure) and the financial advisor (on portfolio liquidity management).
Shurek coordinates with estate attorney and financial advisor| Form | Name | When Due | What It Does and Why It Matters |
|---|---|---|---|
| 1040 | Individual Income Tax Return | April 15 annually (extension to October 15) | While you are holding appreciated assets and borrowing against them, your 1040 is largely unaffected by the unrealized gains — that is the point. Dividends, interest, and any realized gains from other positions are reported normally. The SBLOC itself creates no taxable event and nothing to report. The entire benefit of the buy-borrow-die strategy is that it keeps appreciated positions off your 1040 for decades — until the step-up at death eliminates the gain permanently. |
| Schedule B | Interest and Ordinary Dividends | Filed with Form 1040 annually | Investment income from the portfolio — dividends, interest, capital gain distributions — is reported here. If SBLOC interest is being claimed as investment interest expense, the investment income on Schedule B is what it offsets. We track this annually and advise on whether an investment interest expense deduction is available based on how the SBLOC proceeds were used. |
| 4952 | Investment Interest Expense Deduction | Filed with Form 1040 if investment interest is claimed | If SBLOC proceeds were used to purchase other investments, the interest paid on the SBLOC may be deductible against investment income — dividends, taxable interest, and net short-term capital gains. This form calculates the allowable deduction and carries forward any excess. The deduction can meaningfully offset the interest cost of the SBLOC, improving the economics of borrowing vs. selling. |
| 706 | Federal Estate Tax Return | 9 months after death (6-month extension available) | At death, all assets are reported at their stepped-up fair market value — the basis reset is documented here. Outstanding SBLOC balances appear as estate liabilities, reducing the taxable estate. If the estate is below the $15M exemption, the portability election on the 706 preserves the deceased spouse's unused exemption for the surviving spouse. We prepare this return in coordination with the estate attorney. |
Tax positioning advice on which assets to hold for the strategy. Borrow-vs.-sell modeling for each specific liquidity decision. Investment interest expense deduction optimization if applicable. Estate plan coordination ensuring the strategy fits with the overall picture. Form 706 preparation at death. Ongoing annual review of the strategy's tax dimensions.
Portfolio management — selecting investments positioned for long-term appreciation with tax-efficient structure. Establishing and maintaining the SBLOC with the custodian. Managing margin call risk through appropriate loan-to-value ratios. Advising on the portfolio's liquidity profile relative to outstanding loan balances.
The most important thing: contact us before selling any significantly appreciated position. The borrow-vs.-sell analysis takes one conversation and can be worth tens or hundreds of thousands of dollars in deferred taxes. Maintain sufficient portfolio cushion above loan balances. Everything else is managed by us and your financial advisor.
The buy-borrow-die strategy has minimal compliance burden while positions are held — that simplicity is one of its advantages. The calendar focuses on the decisions that require our involvement.
Contact Us — Borrow vs. Sell Analysis
The most important calendar trigger in this strategy: before you sell any significantly appreciated position, contact us first. We will model the after-tax comparison in real time — capital gains cost of selling vs. annual interest cost of borrowing over your expected holding period. This analysis often reveals that borrowing is more efficient for many years. One phone call can save hundreds of thousands of dollars.
Portfolio Position and Loan Balance Review
We review your unrealized gain position and outstanding SBLOC balance annually. We confirm the portfolio cushion above the loan is adequate — ideally at least 2x the outstanding balance — to protect against forced liquidation in a market downturn. We also identify any positions that have declined enough to warrant repositioning without significant gain recognition.
Year-End Tax Planning Integration
We review the buy-borrow-die positions as part of year-end tax planning. If any positions should be harvested for losses, we identify them. If any positions are near holding period thresholds (1 year for long-term treatment), we note them. We ensure the overall tax picture for the year is optimized.
Form 1040 and Schedule B Filed
Investment income from the portfolio — dividends, interest, any realized gains — reported on your return. If investment interest expense is being claimed on SBLOC proceeds used for investment purposes, Form 4952 is filed. The return itself is simple; we prepare it in coordination with your other planning.
Step-Up Applied — Form 706 Filed
At death, all assets receive a step-up in basis to current fair market value. Outstanding loan balances are estate liabilities reducing the taxable estate. Form 706 documents the stepped-up values and the loan offsets. We prepare the estate return in coordination with the estate attorney, ensuring the step-up is properly documented and the SBLOC balances are correctly reflected as estate liabilities.
Estate Liquidity Coordination
We confirm annually that the estate plan accounts for outstanding loan balances — the estate must have sufficient liquid assets to repay SBLOCs at death without forcing distressed sales of illiquid assets. This coordination happens in our annual estate plan review with you and your estate attorney.