You don't even need a significant return on capital for the strategy to pay off, it just has to slightly beat the interest on the loan over a very long time horizon. Consider these numbers: $100 million subject to capital gains, $10 million in cash needed for expenses, a 2% interest rate, a 2.5% return on investment, a 20% capital gains tax, and a 10 year timeframe.
The borrowing strategy starts with $100 million and a $10 million loan, and ends up with $128 million and a $12.2 million loan, so net $115.6 million (and the interest is likely tax deductible).
The taxpaying strategy starts with $88 million and ends up with $112.65 million.
The borrowing strategy starts with $100 million and a $10 million loan, and ends up with $128 million and a $12.2 million loan, so net $115.6 million (and the interest is likely tax deductible).
The taxpaying strategy starts with $88 million and ends up with $112.65 million.