TL;DR: He spent $1,700 to buy 1.7million shares of PayPal pre-IPO at 0.001 per share. The price exploded and he's rolled the PayPal gains into other very successful investments such as FaceBook and Palantir (again pre-IPO). Edit: He actually paid 3% tax on it. "While SEC filings describing that time don’t mention Thiel’s Roth, they show that he bought his first slice of the company in January 1999. Thiel paid $0.001 per share — yes, just a tenth of a penny — for 1.7 million shares. At that price, he was able to buy a large stake for just $1,700. Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth. PayPal later disclosed details about the early history of the company in an SEC filing before its initial public offering. The filing reveals that Thiel’s founders’ shares were among those the company sold to employees at “below fair value.” Victor Fleischer, a tax law professor at the University of California, Irvine who has written about the valuation of founders’ shares, read the PayPal filings at ProPublica’s request. Buying startup shares at a discounted $0.001 price with a Roth, he asserts, would be indefensible." https://www.propublica.org/article/...s-into-a-5-billion-dollar-tax-free-piggy-bank Longer discussion with more explanations: "Thiel then did something unusual: For five years starting in 2010, he dipped into his Roth for at least $254 million, the IRS tax return data obtained by ProPublica shows. That is almost unheard of among the wealthy, tax advisers say, because it shrinks the pot of money that can be invested tax-free. Because Thiel was still in his 40s, he was too young to pull money from a Roth without paying income tax plus a 10% penalty on these withdrawals. Then During the life of his Roth, Thiel also has made money outside it. He took in an additional $687 million of income from 1999 to 2018, largely from gains on investments, tax records show. All told, over that period he paid $206 million in federal taxes, including the taxes on the early Roth withdrawals. So he has, in fact, paid hundreds of millions in taxes." >>>(makes it 3%, the $250mil he withdrew is roughly 5% of the reported $5B. 60% of 5% is 3%)
%% ILLEGAL profits?? HUH?? ?? Congress passed that Roth/back door Roth tax shelter law . OH i see ,some tax law professor in CA doesn't like that/no wonder CA is losing so many people/LOL.
The whole issue is he skirted the law regarding buying assets below fair market value within a retirement account. Forget everything else.
I don't think I'd call that skirting, it just flat out violates the law. What an asshole, if there was ever an example of why it would pay for itself many times over to hire more IRS investigators this is is it.
That doesn't matter because those shares were still below fair market value at the time and thus illegally acquired.