Peter Thiel, the billionaire co-founder of Paypal Holdings Inc. and a vocal opponent of higher taxes, had amassed $5 billion in a tax-free Roth individual retirement account by 2019, ProPublica reported, citing confidential Internal Revenue Service records.
Investment gains in Roth IRAs are never taxed, and the accounts are subject to contribution and income rules designed to limit them to middle-class taxpayers. In 1999, when Americans could contribute at most $2,000 per year to Roth IRAs, Thiel placed into the account 1.7 million shares of then-private PayPal, which were valued at just $0.001 per share.
Within a year, the value of his Roth jumped from $1,664 to $3.8 million. Thiel, 53, later used his Roth to make highly successful investments in Facebook Inc. and Palantir Technologies Inc., ProPublica reported, citing the tax records and other filings and documents. By 2019, Thiel’s Roth held $5 billion “spread across 96 subaccounts.”
The proceeds of a Roth IRA are tax-free as long as they’re not accessed until an account holder reaches 59.5 years old.
Americans are now typically restricted to putting a maximum $6,000 into a Roth. The average account was worth $39,108 in 2018, ProPublica said.
ProPublica said Thiel didn’t respond to their requests for comment.
Wealthiest Americans
The news organization this month reported they obtained tax records on thousands of the wealthiest Americans covering more than fifteen years. ProPublica revealed that billionaires such as Jeff Bezos and Elon Musk have in some years paid minimal or no income tax even as their fortunes have soared. It outlined the tax strategies available to the top 0.1%, including Bloomberg LP founder Michael Bloomberg, founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.
ProPublica said the information was sent unsolicited to the news outlet by a source whose identity it doesn’t know. The disclosure has since been referred to federal investigators to probe the leak of confidential information, an IRS official has said.
Through the tax data, the news organization identified other holders of IRA accounts in excess of $20 million. They include Ted Weschler of Berkshire Hathaway Inc., who had $264.4 million in his Roth, and his boss Warren Buffett, with $20.2 million. Hedge fund manager Randall Smith of Alden Global Capital, had $252.6 million, while Robert Mercer held $31.5 million in his Roth, ProPublica said, citing records.
Weschler, Buffett and others created their accounts via a technique known as a “backdoor” Roth conversion, where they paid tax to the IRS upfront to convert a traditional IRA to a Roth. The option was created by Congress and President George W. Bush in 2006 as a short-term way to raise revenues.