In this episode of Adam Talks, Adam Bergman, Esq. discusses the Peter Thiel strategy of using Roth IRA funds to invest in founder’s stock for your new business.
Starting a business? This is the True Silicon Valley Way
On this episode of Adam Talks, tax attorney Adam Bergman discusses the strategy used by Peter Thiel to invest in a startup and shelter all gains from the sale of stock tax free. Bergman explains how individuals can emulate Thiel’s strategy by using a Roth IRA or Roth 401(k). He emphasizes the importance of starting a business early, owning less than 50% of the stock, and paying fair market value for the shares.
Bergman illustrates Thiel’s successful use of this strategy with PayPal, where he bought 1.7 million shares for $1,700, and the value of these shares later soared to $28 million. He highlights the difficulty the IRS faces in challenging this strategy, given the three-year statute of limitation and the lack of disqualified persons involved. Bergman also discusses the tax implications of using a C Corp versus an LLC for this strategy.
Bergman stresses the simplicity of the founder stock strategy compared to other investment structures, and the potential for substantial tax-free wealth generation. He encourages listeners to explore his YouTube channel for more information and success stories related to tax-free wealth generation. Throughout the episode, Bergman expresses enthusiasm for helping individuals use the tax code to their advantage and build legacy wealth for themselves and their families.
In summary, Bergman offers a detailed and insightful explanation of Peter Thiel’s strategy for sheltering gains from the sale of stock tax-free, and how individuals can utilize a similar approach to generate substantial tax-free wealth through their retirement accounts. He emphasizes the importance of early implementation, ownership structure, and fair valuation, while also highlighting the roadblocks the IRS faces in challenging this strategy.
To learn more, be sure to listen to the whole episode!