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If they are taxing unrealized gains in one year, are they returning funds at the same rate on unrealized losses in the next year? (This isn't a rhetorical quest

• belorn 6y ago
  No, a predetermined rate is predetermined regardless if the outcome at the end is a loss or profit. The benefit of doing so for the investor is that the potential for profits is higher, and on average the predetermined tax rate is a bit lower than the actually tax you would pay after selling the stocks. Let say as an example you bought stocks in an index fond between 2010 and 2018. The average result from all index fonds was +8%. With regular income tax on sales the resulting profits people got after tax was 5.6% each year. With the predetermined tax they got to keep 7.547% out of those 8%. But this year the crash might have resulted in less than 0.457% profits, in which case the predetermined tax can be higher than what the income tax would be on sales.