Leveraging Both Sides of the Balance Sheet to Help Build Wealth l 9
Liquidation vs. SBLOC vs. Consumer Unsecured Case Study
Utilizing credit for smaller liquidity needs may prove more effective versus liquidating securities. As seen in
the hypothetical scenario below, a relatively small securities-based line of credit (SBLOC) or a consumer
unsecured loan of $100,000 can prove beneficial for deferring capital gains and avoiding the immediate tax
consequences of security sales. With either the SBLOC or the consumer unsecured loan, a portfolio remains
fully intact and participatory in the market.
Liquidation SBLOC Consumer Unsecured
Portfolio
$ 5,000,000 $ 5,000,000 $ 5,000,000
Liquidation Request $ 100,000
Cost Basis $ 40,000
Remaining Investment $ 4,900,000 $ 5,000,000 $ 5,000,000
Total Portfolio Return $ 294,000 $ 300,000 $ 300,000
Year-One Loan Cost $ – $ 4,150 $ 6,990
Taxes Paid $ 12,000 $ – $ –
After Tax Net Return $ 282,000 $ 295,850 $ 293,010
Value Gained Using Credit $ 13,850 $ 11,010
6% Market Return
4.15% SBLOC APR
6.99% Consumer Unsecured APR
20% Marginal Tax Rate
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