> We don't tax unrealized gains for that exact reason. I may be missing your point but the example you give looks like an argument to tax unrealized gains. >

> We don't tax unrealized gains for that exact reason. I may be missing your point but the example you give looks like an argument to tax unrealized gains. > Let's say you have $10M in in index funds. You don't want to cash out and pay capital gains, so you get a $5M credit line with your stock as a collateral. Then, there's a market crash, your collateral is all of sudden worth just $4M, and you have a bank knocking on your door - but you already spent $5M on a McMansion. Now what? Now you have a problem caused by leverage - and it was at least in part because you didn't want to pay taxes. If unrealized gains had been taxed just the same the concern about paying taxes when cashing out would disappear.