3 ms·
Maybe don't allow unrealized gains to be used as collateral for borrowing?
by bluefirebrand 2y ago
Maybe don't allow unrealized gains to be used as collateral for borrowing?
- voisin 2y agoI am inclined to agree with your suggestion and agree with OP. Mr Entrepreneur starts a business with $1,000 of his own capital and manages to grow his stake to $1,000,000. If the only way for him to use the $1,000,000 as collateral for a loan is to sell it and realize the gain, then he doesn’t need the loan anymore and a successful entrepreneur is deprived of ongoing ownership. But by allowing him to borrow on the $1,000,000 and taxing him, he is still able to maintain his share and use a portion of the loan proceeds to pay the new collateral tax. Netting less of the loan proceeds seems preferable for everyone than to force him to sell his stake.