Indeed. However, it might make sense to change the definition of "realized". For example, if you use invested capital as collateral for a loan, we could require that it be valued at its basis cost. If you want to use the current market value of the stocks for loan collateral, then the IRS could recognize that the loan institution "realizes" that the stocks have appreciated in value and that the holder of the stocks agrees on the valuation. Multiple parties realized that the stock has a higher value today than its basis cost and expect it to presumably hold at least roughly that value for the duration of the loan.
Using the market value as collateral is in fact one way of realizing the gains: the investor is using the loan to convert their gains on invested capital into something usable. The capital gains tax would only be triggered when the investor utilizes a price other than their basis cost for their financial instruments.
This would probably not affect very many people: 99% of people don't use their retirement stocks as collateral on loans. It would fix the "Jeff Bezos et al. never pay taxes because they just keep getting bigger and bigger loans to pay off their loans" nonsense.
I don't think anyone in D.C. is currently proposing this, but I think it's a nifty idea. Even if the tax revenue generated is modest, it would boost the average citizens confidence that the system is working and not rigged/broken. And that is probably something worth pursuing these days given how dissatisfied voters have been for the past 9 years or so.
My house is already taxed on its current value rather than the value I purchased it for.
There are small edge cases for "the thing I own is worth a gazillion dollars now but I never want to sell it." Those edge cases already exist with the "I grew up in this house and I am emotionally attached to it" situation. It sure seems to me like people having unrealized gains in equities is, you know, vastly more common than finding out that the weird knick-knack that reminds you of your mom is actually a valuable collectable worth millions.
A good chunk of that is illiquid because it is capital invested in funds that may or may not be priced/valued accurately. And Harvard has $7-8B in outstanding debt.
If there’s a severe recession or crisis, it’s not clear that Harvard will sail smoothly through it without some turbulence. Though i’m not implying they would sell some these priceless assets.
Hence why taxing "unrealised capital gains", as was floated during a recent election, is preposterous.
Indeed. However, it might make sense to change the definition of "realized". For example, if you use invested capital as collateral for a loan, we could require that it be valued at its basis cost. If you want to use the current market value of the stocks for loan collateral, then the IRS could recognize that the loan institution "realizes" that the stocks have appreciated in value and that the holder of the stocks agrees on the valuation. Multiple parties realized that the stock has a higher value today than its basis cost and expect it to presumably hold at least roughly that value for the duration of the loan.
Using the market value as collateral is in fact one way of realizing the gains: the investor is using the loan to convert their gains on invested capital into something usable. The capital gains tax would only be triggered when the investor utilizes a price other than their basis cost for their financial instruments.
This would probably not affect very many people: 99% of people don't use their retirement stocks as collateral on loans. It would fix the "Jeff Bezos et al. never pay taxes because they just keep getting bigger and bigger loans to pay off their loans" nonsense.
I don't think anyone in D.C. is currently proposing this, but I think it's a nifty idea. Even if the tax revenue generated is modest, it would boost the average citizens confidence that the system is working and not rigged/broken. And that is probably something worth pursuing these days given how dissatisfied voters have been for the past 9 years or so.
Getting a margin loan with your stocks as collateral is a couple of clicks away in your brokerage.
Actually weird of so few people make use of it.
My house is already taxed on its current value rather than the value I purchased it for.
There are small edge cases for "the thing I own is worth a gazillion dollars now but I never want to sell it." Those edge cases already exist with the "I grew up in this house and I am emotionally attached to it" situation. It sure seems to me like people having unrealized gains in equities is, you know, vastly more common than finding out that the weird knick-knack that reminds you of your mom is actually a valuable collectable worth millions.
> “My house is already taxed on its current value rather than the value I purchased it for.”
That’s what California’s Prop 13 was supposed to address.
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They could use it as collateral for debt.
Then again, Harvard has a 53 billion dollar endowment so it probably wouldn't be necessary.
A good chunk of that is illiquid because it is capital invested in funds that may or may not be priced/valued accurately. And Harvard has $7-8B in outstanding debt. If there’s a severe recession or crisis, it’s not clear that Harvard will sail smoothly through it without some turbulence. Though i’m not implying they would sell some these priceless assets.
with how trump vs Harvard its going, don't put away your millions yet. you might be able to buy it!