> If it were taxed only when realized, that would make sense. The tax man does not like this. They like wealthy people to always pay something, each year. Henc

> If it were taxed only when realized, that would make sense. The tax man does not like this. They like wealthy people to always pay something, each year. Hence, property taxes, so it can siphon off something at least. Also, why we have the alternative minimum tax schedule to prevent stock compensation to be used as a means to avoid taxes. The little old lady _is_ wealthy, a speculator effectively. She owns a valuable asset, the land her home sits on. The fact that she moved there 30 years ago, in your scenario, gives her an inherent claim to that asset. It's because of that same view we basically have Prop 13. Land value tax is a radical statement, in that people should not be able to profit from the value created by the community, of speculation basically. Your scenario highlights nicely how that causes friction with some of our innate sense of right and wrong. Deferring taxes to sale, may be a way to address this, but if history is a guide, it will instead create avenues for tax dodging.