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It is not messy at all if you use KISS. You do not differentiate ever - ANY usage of unrealized gains makes them realized. Very simple to implement but of cours

It is not messy at all if you use KISS. You do not differentiate ever - ANY usage of unrealized gains makes them realized. Very simple to implement but of course won't ever happen :)

JumpCrisscross 2y ago
> ANY usage of unrealized gains makes them realized What does "usage" mean? If you write a covered call, did you "use" the asset? If your broker lends your shares out, are they being used? What about presenting your brokerage statement as proof of assets to a mortgage banker? What about--I've done this--showing your brokerage statements to American Express to get a better rate? I'm still only talking about publicly-traded common stock, mind you. > simple to implement but of course won't ever happen Possible, but stupid. You'd raise taxes on the middle class who can't afford advice (or personal attention from lenders) while doing little to those who can dance in the ambiguity offered by what seems simple from a distance but is devilishly complex up close. Because at the end of the day, what you're trying to differentiate is intent. And intent is easy to hide and expensive to uncover. The core problem in this scheme isn't so much the deferred taxes as much as the eliminated ones: capping the step-up basis to e.g. $10mm, the EPA's statistical value of a human life, would do the trick. Unlike ascertaining "usage," whether or not someone has died is generally simple to determine.
- bdangubic 2y ago
  I think this is the core issue for me in these discussion - it is not complex at all. If you sell your securities - you pay a tax - that part is simple. Until they it is "unrealized" - right? > If you write a covered call, did you "use" the asset? Yes > If your broker lends your shares out, are they being used? Yes > What about presenting your brokerage statement as proof of assets to a mortgage banker? Of course not > What about--I've done this--showing your brokerage statements to American Express to get a better rate? Of course not > You'd raise taxes on the middle class who can't afford advice This is always funny to me, middle class :) For sure it would not affect the middle class and there.is not need to "afford advice" when there is nothing complex about this that needs an advice of anyone. > Because at the end of the day, what you're trying to differentiate is intent Not at all, it is not "intent" at all - it is just very, very simple... You can own stock and keep it there - no problems. You want to use it for ANYTHING, you pay taxes on it.
  - JumpCrisscross 2y ago
    > What about--I've done this--showing your brokerage statements to American Express to get a better rate? Of course not You say "there is nothing complex about this" after conceding this loophole the size of a planet. For starters: loan with a covenant that governs further borrowing and requires you to instruct the lender if your marketable assets fall below a certain value. Not technically secured. But not relevant if you're lending tens of millions to a billionaire--plenty of firms will provide this. Next up: loan to heirs. Next up: unsecured loans at preferential rates if you store your securities with the lender. (This is already a thing.) > want to use it for ANYTHING, you pay taxes on it Swapping "use" for "usage" doesn't address the fundamental issue.
    - bdangubic 2y ago
      I see where you are going with this but you are changing parameters here. > For starters: loan with a covenant that governs further borrowing and requires you to instruct the lender if your marketable assets fall below a certain value. You did not say anything like this, you said "What about presenting your brokerage statement as proof of assets to a mortgage banker?" - this is like me showing my bank account balance during speed dating to flex a bit :) Your example would be 1000000% taxed as you are obviously using it as realized gain. > Next up: loan to heirs. If you are using real money, loan all you want. If you are using "money" you are telling Uncle Sam you do not have then you pay tax before you borrow that. > Next up: unsecured loans at preferential rates if you store your securities with the lender. (This is already a thing.) This is up to the lender... If they want to use my skin color or my gender or my zipcode (all of which they do) they can also use other stuff as well I get that I am oversimplifying this but surely a system can be put into place that prevents current madness :)
      - JumpCrisscross 2y ago
        > Your example would be 1000000% taxed as you are obviously using it as realized gain How? There is nothing different from the Amex example. In both cases I'm showing assets held elsewhere as proof that I'm rich. In neither case am I pledging anything. In both cases the letter of the contract requires me to notify the lender of material changes in my financial condition, and in both cases I get a favourable rate--sometimes equal to the pledged asset rate. > is up to the lender Yes, and they'd rationally replace secured loans to anyone with unsecured loans to the very rich which automatically accelerate on the borrower's death and carry on as usual. In the end, the behaviour stays the same: the rich let their stock appreciate while they borrow, personally, to fund spending, all the way until they die when the bases step up, they cover the loans and then the heirs get to do the same thing.
splintercell 2y ago
No offense, but I don't believe you understand the nuance of the thing you're talking about. It is very easy to say 'any attempt by a murderer to flee the state, and he should be thrown back into the jail' for someone with limited education about western law and order. This is exactly how you sound.
- bdangubic 2y ago
  This is exactly what the billionaires have been able to convince the masses :) It would be "very hard, impossible" to implement a system in which you cannot for the purposes of paying taxes claim you do not have some sht while turning around and heading over to the bank to get a boatload of money borrowing against that same sht - need a genius to figure that out...
  - deleted 2y ago
    [deleted]
  - ywvcbk 2y ago
    No, the fact that your proposal isn’t thought through at all and is entirely impractical doesn’t mean that solving this problem is "very hard, impossible". That seems entirely unrelated..
jjav 2y ago
> ANY usage of unrealized gains makes them realized I don't feel like you're thinking this through. Can you define (precisely enough to write into the tax code) what is "usage"? For example, let's say I go to get a second loan for a vacation home. The Uniform Residential Loan Application asks me to list all significant assets. Such as my first house. Am I "using" the value of my primary home? The second loan is not a lien against the first home, I'm not borrowing anything against it. They are unrelated. But the lender will probably consider my equity there as additional net worth which can be a factor in approving that second loan.
ywvcbk 2y ago
So if you take out a small business loan and use any type of collateral you now have to pay taxes on it? Significantly increasing the cost of borrowing for most non large companies is certainly a great idea.. it obviously won’t lead to less competition and more concentration. > It is not messy at all If you ignore the consequences and implications (or can’t grasp them at all) then sure..

It is not messy at all if you use KISS. You do not differentiate ever - ANY usage of unrealized gains makes them realized. Very simple to implement but of course won't ever happen :)

JumpCrisscross 2y ago

> ANY usage of unrealized gains makes them realized What does "usage" mean? If you write a covered call, did you "use" the asset? If your broker lends your shares out, are they being used? What about presenting your brokerage statement as proof of assets to a mortgage banker? What about--I've done this--showing your brokerage statements to American Express to get a better rate? I'm still only talking about publicly-traded common stock, mind you. > simple to implement but of course won't ever happen Possible, but stupid. You'd raise taxes on the middle class who can't afford advice (or personal attention from lenders) while doing little to those who can dance in the ambiguity offered by what seems simple from a distance but is devilishly complex up close. Because at the end of the day, what you're trying to differentiate is intent. And intent is easy to hide and expensive to uncover. The core problem in this scheme isn't so much the deferred taxes as much as the eliminated ones: capping the step-up basis to e.g. $10mm, the EPA's statistical value of a human life, would do the trick. Unlike ascertaining "usage," whether or not someone has died is generally simple to determine.

bdangubic 2y ago
I think this is the core issue for me in these discussion - it is not complex at all. If you sell your securities - you pay a tax - that part is simple. Until they it is "unrealized" - right? > If you write a covered call, did you "use" the asset? Yes > If your broker lends your shares out, are they being used? Yes > What about presenting your brokerage statement as proof of assets to a mortgage banker? Of course not > What about--I've done this--showing your brokerage statements to American Express to get a better rate? Of course not > You'd raise taxes on the middle class who can't afford advice This is always funny to me, middle class :) For sure it would not affect the middle class and there.is not need to "afford advice" when there is nothing complex about this that needs an advice of anyone. > Because at the end of the day, what you're trying to differentiate is intent Not at all, it is not "intent" at all - it is just very, very simple... You can own stock and keep it there - no problems. You want to use it for ANYTHING, you pay taxes on it.
- JumpCrisscross 2y ago
  > What about--I've done this--showing your brokerage statements to American Express to get a better rate? Of course not You say "there is nothing complex about this" after conceding this loophole the size of a planet. For starters: loan with a covenant that governs further borrowing and requires you to instruct the lender if your marketable assets fall below a certain value. Not technically secured. But not relevant if you're lending tens of millions to a billionaire--plenty of firms will provide this. Next up: loan to heirs. Next up: unsecured loans at preferential rates if you store your securities with the lender. (This is already a thing.) > want to use it for ANYTHING, you pay taxes on it Swapping "use" for "usage" doesn't address the fundamental issue.
  - bdangubic 2y ago
    I see where you are going with this but you are changing parameters here. > For starters: loan with a covenant that governs further borrowing and requires you to instruct the lender if your marketable assets fall below a certain value. You did not say anything like this, you said "What about presenting your brokerage statement as proof of assets to a mortgage banker?" - this is like me showing my bank account balance during speed dating to flex a bit :) Your example would be 1000000% taxed as you are obviously using it as realized gain. > Next up: loan to heirs. If you are using real money, loan all you want. If you are using "money" you are telling Uncle Sam you do not have then you pay tax before you borrow that. > Next up: unsecured loans at preferential rates if you store your securities with the lender. (This is already a thing.) This is up to the lender... If they want to use my skin color or my gender or my zipcode (all of which they do) they can also use other stuff as well I get that I am oversimplifying this but surely a system can be put into place that prevents current madness :)
    - JumpCrisscross 2y ago
      > Your example would be 1000000% taxed as you are obviously using it as realized gain How? There is nothing different from the Amex example. In both cases I'm showing assets held elsewhere as proof that I'm rich. In neither case am I pledging anything. In both cases the letter of the contract requires me to notify the lender of material changes in my financial condition, and in both cases I get a favourable rate--sometimes equal to the pledged asset rate. > is up to the lender Yes, and they'd rationally replace secured loans to anyone with unsecured loans to the very rich which automatically accelerate on the borrower's death and carry on as usual. In the end, the behaviour stays the same: the rich let their stock appreciate while they borrow, personally, to fund spending, all the way until they die when the bases step up, they cover the loans and then the heirs get to do the same thing.

splintercell 2y ago

No offense, but I don't believe you understand the nuance of the thing you're talking about. It is very easy to say 'any attempt by a murderer to flee the state, and he should be thrown back into the jail' for someone with limited education about western law and order. This is exactly how you sound.

bdangubic 2y ago
This is exactly what the billionaires have been able to convince the masses :) It would be "very hard, impossible" to implement a system in which you cannot for the purposes of paying taxes claim you do not have some sht while turning around and heading over to the bank to get a boatload of money borrowing against that same sht - need a genius to figure that out...
- deleted 2y ago
  [deleted]
- ywvcbk 2y ago
  No, the fact that your proposal isn’t thought through at all and is entirely impractical doesn’t mean that solving this problem is "very hard, impossible". That seems entirely unrelated..

jjav 2y ago

> ANY usage of unrealized gains makes them realized I don't feel like you're thinking this through. Can you define (precisely enough to write into the tax code) what is "usage"? For example, let's say I go to get a second loan for a vacation home. The Uniform Residential Loan Application asks me to list all significant assets. Such as my first house. Am I "using" the value of my primary home? The second loan is not a lien against the first home, I'm not borrowing anything against it. They are unrelated. But the lender will probably consider my equity there as additional net worth which can be a factor in approving that second loan.

ywvcbk 2y ago

So if you take out a small business loan and use any type of collateral you now have to pay taxes on it? Significantly increasing the cost of borrowing for most non large companies is certainly a great idea.. it obviously won’t lead to less competition and more concentration. > It is not messy at all If you ignore the consequences and implications (or can’t grasp them at all) then sure..