This actually happened with bitcoin a while back due to its under-regulated nature. A few people lost their pants when the value of bitcoin skyrocketed on one day in december and then plummetted in early January, and the IRS came knocking for those unrealized gains.
Largely, We don’t tax unrealized gains because unrealized gains is value that hypothetically can disappear as quickly as it shows up. It’s like taxing someone after every hand of blackjack - you can end up broke AND owing 10x your starting money in capital gains taxes. In theory, a stock portfolio can go from way-up to way-down in 24 hours. Ditto with real-estate if there manifests an uncovered loss event or the title gets fucked, or environmental regulation changes in a way that affects the property, etc.
…I’m not saying there’s not a way to do it right. It just needs to be done very VERY carefully so as not to bankrupt people. It would likely have to be more complicated than most tax law is now.
This actually happened with bitcoin a while back due to its under-regulated nature. A few people lost their pants when the value of bitcoin skyrocketed on one day in december and then plummetted in early January, and the IRS came knocking for those unrealized gains.
Largely, We don’t tax unrealized gains because unrealized gains is value that hypothetically can disappear as quickly as it shows up. It’s like taxing someone after every hand of blackjack - you can end up broke AND owing 10x your starting money in capital gains taxes. In theory, a stock portfolio can go from way-up to way-down in 24 hours. Ditto with real-estate if there manifests an uncovered loss event or the title gets fucked, or environmental regulation changes in a way that affects the property, etc.
…I’m not saying there’s not a way to do it right. It just needs to be done very VERY carefully so as not to bankrupt people. It would likely have to be more complicated than most tax law is now.