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He said delay, but that's just because the stock hasn't sold yet. Until you do, the gains are unrealized, i.e. the stock could drop precipitously suddenly due t

He said delay, but that's just because the stock hasn't sold yet. Until you do, the gains are unrealized, i.e. the stock could drop precipitously suddenly due to some black swan event (i.e. a pandemic), and then they suddenly that wealth may as well never have existed. Like let's say I'm some regular guy, but I put my only $1000 in some asset that appreciated 100x, and it's now "worth" $100,000. These people that want to tax unrealized gains swoop in and go "hey, you're 'worth' $100k on Dec 31, you should pay us $30k in taxes this year". And so I don't have that money and have to sell my stock to pay it, but two days before I do the stock market tanks before I get a chance to sell and it's dropped 70% in price, so now I'm 'worth' 30k. And now I've sold it all just to pay the unrealized gains tax. Now this is an extreme example and unlikely to happen exactly in the stock world, although not terribly extreme if this weren't stocks we're talking about, but some cryptocurrency. This is why taxing unrealized gains never made much sense to me. The gains aren't actually real until you've converted them into something else or you purchase goods or services with. Until then it's just some number on a scoreboard.

elliekelly 5y ago
You can borrow against the gains though so they aren’t exactly unrealized gains either.
- cableshaft 5y ago
  Yeah, borrow as in you have to pay it all back plus an extra percentage. It might be a lower percentage than capital gains, but you better hope the asset keeps appreciating at more than you borrowed + percentage. And then once you pay it back you still have to eventually cash out and pay capital gains tax anyway. Like if I had done that with bitcoin a couple of months ago (and it's possible to do, there's DeFi now), I would have been in some deep shit with the 50% drop recently. It does seem like a bit of a sidestep though, and I'm sure rich people are probably taking advantage of it, so I wouldn't be opposed to some sort of small tax on money gained from loans made against your assets assuming you owned enough of them (like I don't want to hurt small business loans or anyone in the middle class from it), to discourage this practice a bit.
auspex 5y ago
This is also why I think it’s crazy we pay taxes on startup options when exercised. There’s not market to liquidate to pay those taxes and the end value is very likely $0

elliekelly 5y ago

You can borrow against the gains though so they aren’t exactly unrealized gains either.

cableshaft 5y ago
Yeah, borrow as in you have to pay it all back plus an extra percentage. It might be a lower percentage than capital gains, but you better hope the asset keeps appreciating at more than you borrowed + percentage. And then once you pay it back you still have to eventually cash out and pay capital gains tax anyway. Like if I had done that with bitcoin a couple of months ago (and it's possible to do, there's DeFi now), I would have been in some deep shit with the 50% drop recently. It does seem like a bit of a sidestep though, and I'm sure rich people are probably taking advantage of it, so I wouldn't be opposed to some sort of small tax on money gained from loans made against your assets assuming you owned enough of them (like I don't want to hurt small business loans or anyone in the middle class from it), to discourage this practice a bit.

auspex 5y ago

This is also why I think it’s crazy we pay taxes on startup options when exercised. There’s not market to liquidate to pay those taxes and the end value is very likely $0