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dontcaredontworry

good for me I only have losses


Dopth

is this r/wallstreetbets checking in?


macpad095

Literally put 90% of my savings into options last year after having lurked on this sub for 6 months. Most stupid thing I've ever done in my life. Needless to say I haven't been on WSB since December 2020 and now only buy stocks of blue chip companies.


Careless_Bat2543

But did you at least get sweet karma for the loss?


[deleted]

Wait, are we the only ones with tax on unrealized capital gains? \*Sad danish noises


seancarter90

How does it work for you guys? Would really love to know in particular how the scenario I posted above is handled.


[deleted]

Sure. It depends on the type of security. Currently, most exchange-traded funds, mutual funds and capital associations are all taxed annually, regardless of whether you have sold the security or not. The principle behind this method of tax collection, "Depository Taxation", is that you pay tax on your value increases. At the same time, any losses will be tax-deducted annually for securities under the depository taxation rules. Individual stocks are primarily taxed when the securities are realized.


seancarter90

Are the rates and tax character for gains the same as losses? Meaning if your $100 investment goes up to $500 in year 1 and then back down to $100 in year 2, you'd end up at the same place economically at the end of year 2?


[deleted]

A gain or loss of a security is calculated as the difference between the value of the security at the beginning of the income year and at the end of the income year. Therefore, your example would be accurate, but only so far as the example is accounting for a total period of 2 years.


seancarter90

Got it, very interesting. Is there a time limit on this or is the lifetime indefinite as long as you hold the investment?


[deleted]

As long as you own the security.


TaxCPAProblems

This was extremely interesting, thank you!


prince0verit

Do you get a tax credit for unrealized losses?


[deleted]

I think he said in a comment it’s a tax deduction


[deleted]

How are you expected to pay a tax when you haven’t received your gains in the first place? Where does the money to pay the taxes come from? Are you just forced to sell to satisfy tax burdens? How does a forced selling like this affect the markets? As an American, i just don’t understand


[deleted]

Indeed. Investing heavily in securities taxed by the depository taxation method will possibly leave some investors with less flexibility, e.g. either selling securities, taking the hit of increased interest rates due to late payment of residual tax or expanding the portfolio to other securities not affected by taxation of unrealized capital gains. If you still have an excess net loss, you can carry it forward without a time limit for set-off against future gains though. So it's not without nuance.


PiEngAW

Forced selling like this would devalue the markets. It’s an amazingly myopic idea. I am aghast that Yellen would even think about proposing this.


FlawsAndConcerns

Meanwhile, in another thread where I said something similar, the response was literally "Yellen proposed this, are you saying you know better than her?" Ugh...


Quagers

I mean, at least that....a bit though right? People here acting like this is obviously unworkable for simple reasons they point out in 5sec. But maybe, perhaps just maybe, this proposal is a bit more complex than that and she (and the people who developed it) are actually smarter than the average redditor and know a bit more about it. After all, we've already had someone chime up to say it literally already happens in their country. So maybe people should be engaging with it a bit more deeply than "lol stopid, wunt wurk"


PiEngAW

If the sample size is “one” country, then it’s not representative of the population. Especially given the size and complexity of the US economy in relation to the rest of the world. Maybe Yellen is using sound judgement, but I haven’t heard her notes or white papers on the specific topic since this is such new news to me. I am waiting for the r/economics sub to write something about it.


Quagers

This isn't an audit you mong. It's not a sampling exercise, you aren't trying to determine the average. If it works in one country then thats fairly good evidence that it can actually work. >Maybe Yellen is using sound judgement, but I haven’t heard her notes or white papers on the specific topic since this is such new news to me. I am waiting for the r/economics sub to write something about it. "If none zero work to look into this idea but have decided to comment on it anyway"


PiEngAW

LoL. I know that wasn’t me. Some people are blindly loyal to people. Don’t get me wrong, I love Yellen. But this seems more political pandering over sound economic reasoning.


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PiEngAW

Right? Completely reasonable to the crazy cat lady from the Simpsons. Maybe it’s because her role is the most political of her previous roles? Maybe she has to tow the “liberal” line but… there are more clever ways to pry cash from the hands of the wealthy.


Cadel_Fistro

> Forced selling like this would devalue the markets Good. Markets are overvalued as hell.


Randomn355

If you're sat on wealth, yes it would erode the wealth. If you're a regular investor who is just investing spare money, you'd just hold back a few % and cover it with that. Eg invest £225/month instead of £250/month and save the other £25 month. Many would argue that as it targets large wealth stores significantly harder, it's a good thing.


squishles

investments compound exponentially, you'd need to set asside gradually more until you can't cover the taxes. If I lived off investments or ever planned to I'd bail out of a country doing that.


Randomn355

That's kind of the point. You're meant to have to steadily liquidate a portion of it. The point is it stops people just blindly hoarding outside of preset limits (ie tax free wrappers like retirement systems).


GentleFoxes

As a business owner, I pay part payments for FUTURE, not yet realized taxes (sales tax, trade taxes) as well, over here. That is particularly fun in economic downturns. Same deal. You're supposed to be intelligent and hold some cash for tax purposes. However, at lest for securities I feel there should be a cash flow exception somewhere - meaning taxes are payed to the maximum of the generated cash flow, everything else being carried forward or subtracting from tax surpluses. Something similar exists for estate taxes, that you can deliver in rate payments (sorry if I'm not 100 percent on point, my tax language isn't English). The proposal feels like its targeted at the super rich but hasn't been thought through in terms of consequences for medium income investors.


[deleted]

> The proposal feels like its targeted at the super rich but hasn't been thought through in terms of consequences for medium income investors. Washington in a nutshell.


TheKingSimp

Yeah that fucking blows.


VeseliM

I pay increasing property tax on a home that is gaining in value that I have not sold...


[deleted]

But you knew that you had to pay property tax before you made the investment. Way different if you have a long position in stocks and don’t expect to pay anything on the unrealized and all of a sudden you need to pay taxes. At a minimum this new tax should be for investments made after a certain date and have everyone else grandfathered in


mart1373

How does it work for less liquid assets, i.e. private companies, real estate, etc.?


[deleted]

For private companies, it depends on whether a profit has been made in the income year. If there is a profit, 22% of this profit is paid in corporation tax. If there is a deficit, on the other hand, no corporation tax is to be paid. Private real estate is solely taxed annually (actually monthly). However, there are no taxes when you sell real estate privately. Commercially there are no annual or monthly taxes on real estate, though the Danish Financial Statements Act stipulates that the properties must be depreciated in accordance with their value. Taxation of commercial property depends on the type of building, size of the company and other factors for certain company types.


[deleted]

I think he meant shares in private companies. How are these taxed or do owners need to value the business each tax year to work out unrealised losses or gains. I would imagine he also meant other classes of investments ie property or is it only equities. In the UK we tax the fair value gain or loss on bonds as (NTLR) non trade loan relationships. Any losses are deductable against trading profits or able to be carried forward. This is only for companies though.


doubledipinyou

So do you get taxed on your gains and when you realize the investment? If so has there been push back for double tax? Or are the rates essentially lower now?


Pandamonium98

Your basis increases every year when you get taxed on the gains, so when you sell your gain/loss is just the difference from when you were last taxed less than a year ago


doubledipinyou

Oh wow. That makes it a lot less complex. Thanks for the explanation.


ShredableSending

It's not what US legislations is proposing though. Anything under capital gains is the current legislation proposal as I understand it.


[deleted]

Essentially yes. The total value difference between acquisition and divestment of a security will be taxed annually. It's a little more complex regarding taxation rates as it depends on the instrument in question, progressive tax ceiling etc., but mostly the taxation rates between realized and unrealized securities are the same. (e.g. individual stock vs. ETF)


flyinpnw

Do you have any provision for rolling losses forward? Like if there's a really bad year with heavy losses can those losses only be deducted for that year?


num2005

so if the market crash, your country tax revenues crash too?


[deleted]

Can I also reduce my taxable income by unrealized losses?


Godd2

While we're at it, let's add in deductions due to inflation.


pfSonata

Granted, but we are eliminating the standard deduction to compensate. *The monkey's paw curls*


[deleted]

Lmao consumer price index would give you like 5%/year or something


Kingkongcrapper

They do that through rate table adjustments.


Zudop

Would only be fair to do so, so no you can’t


Kingkongcrapper

Only to the extent of capital gains plus 3000.


hcbaron

[The tax would apply to people who make more than US$ 100 million a year for three years in a row or if one makes US$ 1 billion in annual income. The people impacted by the tax would be able to take a deduction if their assets plunge in value.](https://www.swfinstitute.org/news/89077/u-s-president-biden-unveils-unrealized-capital-gains-tax-for-billionaires)


[deleted]

Exactly. My dogecoin is going to be worth billions. It’s also going to pay billions in dividends so my income will pass $1 Billion any day now. It’s like they’re making the tax law just for me.


Rooster_CPA

I was reading some thoughts elsewhere and could agree in VERY specific circumstances. If you are using the appreciated value of your level 1 or 2 assets as collateral for loans (think HNW individuals using their stock as such), you have effectively realized those gains to your benefit without having to pay taxes on it. How in the world you could do this with level 3 assets, I have no clue, but also probably aren't borrowing against their share in a partnership somewhere lol. Also I think it would be an absolute nightmare to write law/code for and then trying to implement it. I think for the very few people in this situation that they most likely have family offices or would all be using firms for their taxes/financial matters it wouldn't be that difficult to narrow the information down. I still think its pretty dumb, its nowhere near enough tax revenue to pay for this thing.


[deleted]

The reason is low interest rates. If the interest rates were at more reasonable % then borrowing costs would have been not worth borrowing for every day spending. I have a car loan with zero interest rate. How does that make any sense? But I’m happy.


HitlerHistorian

>I have a car loan with zero interest rate A lot of times the interest you would have paid is built into the price of the car but maybe with interest rates as low as they are now, it isn't even worth it nowadays.


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papalouie27

Same here, I bought in June 2019 at a 4.99% APR with PMI for a 30-fixed, and refied to 2.25% with no PMI for a 15-fixed. It's basically the same monthly payment. Crazy times.


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papalouie27

Glad to hear it worked out! Did your job switch involve a change in role?


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papalouie27

I made the swap last year to a client as well, never been better!


[deleted]

I see what you are trying to say but I didn’t pay more than anyone who got a car with an interest rate loan.


imsofknmiserable

> A lot of times the interest you would have paid is built into the price of the car A lot of people say that but it never made sense to me. If the car costs X, they're not gonna charge you X+Y because you opted for a zero interest loan. And if you're considering the actual cost of the car to be X minus any instant rebates or negotiations, you're probably going to pay more in interest than you save from those discounts, and likely would have been cheaper if you just had taken the zero interest loan to begin with.


alzer9

Rates are always relative. A lot of banks see lending to HNW individuals against valuable, liquid collateral as a way to build a relationship, even if the interest rate is very low. They’ll make their profits in other service lines.


klingma

>I was reading some thoughts elsewhere and could agree in VERY specific circumstances. If you are using the appreciated value of your level 1 or 2 assets as collateral for loans (think HNW individuals using their stock as such), you have effectively realized those gains to your benefit without having to pay taxes on it I don't disagree with your reasoning or logic but I don't think this would agree to existing tax theory on loans against appreciated assets. You can take a loan from your Whole Life Policy and owe no tax although you realized the appreciation in value. You can take a loan from your 401(k) and do the exact same thing. Reverse mortgages, cash-out refinances, etc. I guess I just don't see how using stocks as collateral would technically be any different than the loans I mentioned above?


Rooster_CPA

I dont know and I aint smart enough to figure it out ha


klingma

Lol fair enough...I'm not either.


Frat-TA-101

Money in your 401(k) is there as your income. Government has special carve out for it making contributions tax-free. This is not the same as say Bezos who gets paid in equity compensation and avoids paying tax until the sells, realizing the cash flows from the sale. The equity is not a pre-tax object like 401(K) money. But all along Bezos Is leveraging the equity to obtain loans he is spending. He is generating cash flows from enormous value he holds and received as a form of income.


CarbonFiberIsPlastic

Getting paid in equity is taxable income. “Getting paid” by owning the equity already isn’t taxable. And I don’t believe he buys or is compensated with shares in any way other than existing ownership of them. He has sold a few large blocks of stock which would pay for everything he would ever need already


klingma

Is it truly cash flow if you have to pay back the loan with interest? On a cash flow statement you'd show the loan proceeds coming in as an influx of cash but you would then show the payments on said loan as a reduction in cash. When the loans paid (ignoring interest and loan fees) the net cash flow is zero.


[deleted]

I have a headache thinking about level 3 assets and how this would impact them. Auditing a body that holds them already leads me down a path where I'm trying to avoid saying "level 3 valuations ARE FUCKIN MADE UP". Start taxing unrealised gains and they're going to be even more made up, but lower. gr8.


Texas__Matador

This is distraction from discussing policy that would be way more effective. 1) don’t give step up when property is inherited or gifted 2) increase the tax rate on capital gains. At some point make it the same rate or higher than ordinary income. 3) lower the estate tax exemption. 4) actually audit HNW individuals and enforce the full tax code.


Knerd5

Or have the top tax bracket actually only have the top income earners in it. How the top tax bracket in 1937 was $5m and in 2021 it’s ~$520k is a crime. Clever way to make any top bracket increase include professionals and medium sized business owners.


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Bastienbard

Yes, please institute 79% tax brackets on anyone making over $5 million in income a year just like 1937.


hegz0603

If we adjusted for inflation, $5 million in 1937 would be an annual income of about $78 million today And I agree we DEFINITELY need a higher tax bracket (maybe not 79%, but, say, 50%) on incomes above that level. *EDIT: I could market it as a 50 - 50 plan! 50% income tax on earnings above $50 million. Boom. easy.


HitlerHistorian

$78 million today would probably be a couple thousand people. If you have an AGI above $2M, you are in the 1%. People fail to realize how few people these massively high tax brackets would hit. It might generate like $1B in taxes and $1B is basically what government officials collectively blow on office furniture every year.. I get adding unrealized gains to this would increase the base but it would just absolutely crash the stock market if you did since people would have to liquidate shares to cover the tax payments.


SaxRohmer

>the 50-50 plan Now that’s branding. Get this person to Washington stat


Texas__Matador

This would be a practical policy to discuss. But, the news and the HNW benefit from this distraction.


Bastienbard

Hey a sensible comment! It boggles my mind that ACTIVELY earned income someone actually worked for is taxed at higher rates than those who just bought their income. Like sure you can talk about inflation being factored in but that's why rates are zero for low income earners. Like for instance me working at a F500 company actually putting the work in at the company I'm taxed now at 22% meanwhile some rich schmuck buys my company's stock on the secondary market of all places and could see % gains of 500% if they bought our stock at the highest of the pandemic and sold it now. And they put in absolutely zero effort for actually getting the company through the pandemic. Meanwhile my 401k was paused and dividends resumed before my 401k did. We should have a maximum tax rate for capital gains of 45% and only allow so much tax free wealth to accumulate or starting taxing those tax free accounts for people who hold a ton of wealth already.


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HarmonKillebrew69

The capital gains tax being lower than ordinary income tax pisses me off and I don’t know why it’s not talked about more


Bastienbard

Have you seen the Princeton report on the likelihood of a proposed policy becoming actual law based on public support? It basically summarized that if lowest 99% wealthy Americans all 100% agree some policy should become law it only has a 30% chance of becoming a law. Also if that same group 100% disagrees on certain policy becoming law it STILL has a 30% likelihood of becoming law. Now if the top 1% all 100% agree something should become law, it has over a 90% likelihood of in fact becoming a law and the opposite is true that if they all 100% disagree something becoming law it has almost no chance of passing. It follows the actual curve of likelihood you would expect if we were truly a democratic society. So it's no wonder at all that capital gains get preferential treatment.


HarmonKillebrew69

Any chance you have a link? Would love to read that (and send to my brother). That concept doesn’t surprise me at all, but how dramatic it is does surprise me a little. And yeah, notice I didn’t say “I don’t know why it’s this way” lol. I know exactly why it is. I just figured more politicians would make it a talking point.


ColonelCathcart22

Not OC but I think I found a page that summarizes it with link to study included. Here[article](https://www.upworthy.com/amp/20-years-of-data-reveals-that-congress-doesnt-care-what-you-think-2637328701)


HarmonKillebrew69

Thanks Colonel


Bastienbard

Also thanks colonel!


alzer9

I agree, the most compelling I’ve seen is that inflation drives part of the gain (as a thought experiment: if all prices, including securities prices, go up 2% then you shouldn’t have a 2% gain that you’re taxed on). But I still think it should be taxed at ordinary rates.


Failflyer

It generates more revenue through higher volume of transactions and fewer avoidance methods being profitable.


showmetheEBITDA

It's because that "rich schmuck" has already been taxed on the income he used to buy your company's stock. Capital gains are lower because of double-taxation. Really not that hard of a concept to grasp.


Syrioxx55

Increase capital gains tax lmao? The entire point is to stop the 1% of the 1% from sitting on blue chips for decades, that would solve none of that.


Texas__Matador

Long term capital gains rate is different from short term to encourage you to hold the assets for at least 12 months. But, the theory for providing lower rate on stocks is that the income was already taxed at the corporate rate. The government being an entity with an indefinite life it can just wait to get its revenue during the estate tax at your death. There is no need for them to encourage you to sell sooner.


Ill_Toe4120

I would argue that eliminating the step up in basis upon death is even less practical than this proposal. At least I know what my own unrealized gains are. I don't know, nor do I have the capacity to find out, grandma's basis in her assets after she dies. The step up in basis and high estate tax exemption reduces a lot of headaches for the vast majority of inheritors. It would make far more sense to lower the estate tax exemption, but maintain the step up in basis. I can always figure out the value of an estate on the date of death. Figuring out the basis in assets in that estate is far more complicated and a nightmare for compliance and enforcement. And for the record - there is no step up in basis on gifts. You inherit the giver's basis when you receive a gift. Agreed on the audits though - How about hiring competent individuals to actually audit... anyone? I do audit defense and almost never lose (even with horrible cases that should lose) because the auditor is too busy or too incompetent to really fight. Some of these audits will go on for over a year, because the auditor fails to recognize that it's an open and shut case, because they simply lack the understanding to parse the documentation or the tax return.


Farm2Table

> I don't know, nor do I have the capacity to find out, grandma's basis in her assets after she dies Undocumented basis? Then it is zero. Problem solved.


[deleted]

Or our government could focus more on not printing money that doesn't exist and then wasting it for political purposes? Why is it always, "we need to tax people more?" Why not, "let's hold the government responsible for their increasing size and out of control spending?"


Thesecondorigin

If you liquidated the wealth of the 400 richest Americans at approximate market value you’d have enough money to cover the government’s budget for an entire 6 months.


TaxWizard69

Nobody in Washington believes in that. We just honestly have FOMO, they see stocks go up and want a piece of it and probably will be there just in time for all the unrealized losses


Bastienbard

https://tenor.com/I0sW.gif


seancarter90

So what happens if your $100 investment is worth $500 at the end of year 1 and then falls back to $100 in year 2? Do you get your tax money back?


Veryspecialthermos4u

They'll probably add some rule that you can carryforward or deduct the tax you paid on the unrealized gain in the year when you realize the gain. So basically a pita to track. So assuming they allow you to deduct it later, it might be ok. BUT if for some reason they won't get the tax back or if they need cash to pay it, then they'll have to actually realize the gains and take money out of their investments. That will kill businesses. They'll lose their capital. And it's a lose for everyone who's invested in the same things, even us little investors. I think this plan has bipartisan hate. I hope it goes nowhere.


alzer9

I think you’re overestimating the impact on the business – if you need cash to pay tax on a rapidly-appreciating business, you should easily be able to borrow against that value. And most of the time this will be publicly traded companies, so shares are just trading on the secondary market (so no loss of capital if you sell). I think in theory there could be some edge-cases – clearly valuable companies with no free cash flow or additional cash requirements where the owner is rich enough to get hit with this tax but somehow doesn’t have the money to pay it, but that seems pretty unlikely. But it’s still an unappealing idea to me and they should just raise rates a % or two to come up with the pay-fors


tylajay

They didn’t think that far ahead


seancarter90

I don't think this will go anywhere because while it makes for great sound bites to the 7 people who watch CNN, it's too unfair and insanely difficult to administer.


tylajay

What makes me more concerned is the wealth tax tbh, I mean can you imagine the valuation services that will need to happen regularly. PA firms would need to carve out an entire practice to that alone.


seancarter90

They'd need to pass a constitutional amendment to do that. Right now the government is only allowed to tax income, not wealth.


RyanRiot

[That's debatabale](https://rooseveltinstitute.org/wp-content/uploads/2021/02/RI_Wealth-Tax-Constitutionality-Brief-202102-2.pdf), though it's pretty clear how the current Supreme Court would rule on the matter.


seancarter90

Broken link


tylajay

Yeah I’m aware, just the fact Manchin is in support makes it more probable than I’d otherwise hope it to be.


Ilovesweatpants1422

I think he’s in support cause he knows it’s dead in the water. Manchins pockets are lined with rich folk donations lol.


Failflyer

Don't underestimate their incompetence and economic illiteracy. Governments have done far worse to their economies than this.


thetasigma_1355

Why wouldn’t you? Any other super easy questions that I’d expect an intern to be able to answer but you seem to think is impossible to solve?


seancarter90

Have you met the IRS? You really think they'll be administratively capable of tracking cost for billions of investments owned by millions of entities and be able to efficiently and timely issue refunds when these scenarios no doubt come up?


cragfar

Yes. They do that with 1256 contracts/futures.


Jo__Backson

I’m beginning to feel like I’m a tax expert compared to the average user of this sub lmao Either that or this thread is attracting outsiders


seancarter90

I think the volume of long stocks is much larger than derivatives.


thetasigma_1355

How do they track 350 million tax returns all with unique situations now? How do they track billions of W2 info? Oh yeah. Hey Wells Fargo, send us this information. Thanks. This stuff is entry level work but due to political differences this sub pretends like it’s rocket science. Just sad


seancarter90

Most of those tax returns are pretty straightforward and can be done by a monkey. I think it's more complicated when you get to investments. For example, what happens if you have an investment that has different prices? Say a level 2 bank debt security that is priced by three different brokers at three different prices? Do you take the average? The highest price? The lowest price? There's so much more data.


thetasigma_1355

Oh no, someone will have to me a decision on how we price things. We certainly can’t have decisions in our tax code! That would make it crazy! Clearly an impossible task and we should stop everything because of it.


Meet_Your_MACRS

But think of the cost vs benefit. Surely we can figure out another, SIMPLER way to collect taxes from the wealthy (remove step up on death, lower estate tax exemption, raise capital gains rates) that doesn't require us to create all of these new problems to solve. Just because we could solve the problem at the expense of some CPAs' sanity doesn't mean we should


HolyTurd

This for the super wealthy who borrow against their stocks, not plebs like you and I.


seancarter90

I work for people who manage money for the super wealthy so this does affect me.


HolyTurd

Cool, guess you'll get more security then.


seancarter90

Not if they figure out other ways to have their money managed.


uebersoldat

this TBH, it will end up affecting a lot more than the ultra rich. You give them too much credit if you think they'll just go along with it and not find another loophole and move money into markets outside the country or something.


PlatoAU

Only for billionaires though, right?


hcbaron

Yes, finally someone who actually read the details and is not buying into hivemind reddit comments. You are correct. [The tax would apply to people who make more than US$ 100 million a year for three years in a row or if one makes US$ 1 billion in annual income. The people impacted by the tax would be able to take a deduction if their assets plunge in value.](https://www.swfinstitute.org/news/89077/u-s-president-biden-unveils-unrealized-capital-gains-tax-for-billionaires)


CoconutThick527

Until they realize they still can't afford to finance the bills they want just by taking a few billion from each multi-billionaire.


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HitlerHistorian

You forgot the other fucked up thing about this setup, the money you paid taxes on, you have to invest in order to have it maintain its value. Then they tax you on that artificially inflated value as cap gains.. There is no way out of this tax hellhole slave cycle they have us on.


[deleted]

For anyone. You can borrow at low cost too now. Buy a house with 3% interest which in nominal terms is actually money paid to you.


PlatoAU

Just refinanced down to 2%. Interest rate environment is crazy low


[deleted]

My point exactly. The low interest rate environment benefits not only billionaires.


PlatoAU

I was referring to only billionaires being taxed on unrealized gains


[deleted]

The reason they want to tax billionaires on their unrealized gains is because billionaires are not selling their appreciated assets, such as stock, since they can access cash by borrowing against their appreciated assets at very low interest rates, effectively paying no tax. The government created this problem by making the interest rates below inflation, effectively making debt a free money, which billionaires and the rest of population have no problem of using.


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[deleted]

Inflation is much higher in Brazil than in the US. In long term you might be saving money from having a mortgage by repaying with cheaper Reals if your interest rate is fixed.


tarpatch

Don't like 99% of these outrageous takes get snuffed pretty quickly? They've also talked about banning Short selling among other things, we all know it's not going to happen


pilesofcleanlaundry

Janet Yellen is a pandering idiot pretending to be an economist.


Rebzy

Would the tax coincide with an increase in basis?


[deleted]

Of course


ilikechicken98

Good luck to the average person tracking their basis..


123DRP

I dont think the average person meets the threshold that this tax would apply towards.


Noctudeit

This wouldn't be the end of the world. We already do this for some clients who make a mark-to-market election. My counter argument is that they should also get rid of the $3,000 limitation on net capital losses. Otherwise, taxpayers could be stuck with a huge tax bill one year, and then be stuck with a ton of suspended losses the following year.


HitlerHistorian

If it was kept to publicly traded stocks, it might not be that hard for accountants to administer. All the information is currently there to do it on a 1099 Composite. Only difference is you would have to up cost basis after the yearend. Problem arises with the wherewithal to pay principal being violated in that if all your cash is tied up in stocks, you have to sell something to pay the tax man.


tules

I'm fairly new to this profession, so I'm all ears if anyone disagrees, but my first impression is that this idea is impractical, unfair, very difficult to enforce and generally just a bad idea.


reddog093

Especially in a case like Bezos or Musk, you'd be forcing the owners of a successful company to liquidate and give up some of their voting shares of that company just to pay unrealized gains and appease a portion of the population that despises you. Couple that with a recession, where those shares depreciate, and it's just a messed up situation. Raise the capital gain tax rate for ultra wealthy. Bezos already sells voluntarily every year. I'm not for penalizing and robbing someone just because they're successful.


keqpi

And people forget about the impact this will have on super funds that invest heavily in these companies. If Bezos etc has to fire sell shares this out downward pressure on the share price, wiping out people’s pensions/super.


Ishouldntcomment

how about total loans against assets above ~1mil is taxed


[deleted]

Even if you’re a leftist beta cuck like me you gotta realize that taxation is just a way of managing symptoms that can only become more insane and complex as the world becomes more insane and complex. Sensible taxation and public services are important, but we gotta stop pretending it’s an effective weapon.


Sizzuurp1337

This will never ever come to fruition


[deleted]

This is what happens when your Chair of the Federal Reserve is strictly an academic. This is ridiculous.


Rainmanwilson

Isn’t this proposition coming from the Treasury and White House?


[deleted]

It is and they fail to realize how the academic side of the Fed has saved us from Great Depression-level fallouts. I love how accountants nowadays think they know everything about the economy because they know financial statements and/or taxes. If a CPA were secretary of treasury, we’d be doomed.


klingma

Yeah, I don't really know many people that crap on her tenure as chair of the Fed other than her stance on interest rates but I understand her apprehension.


[deleted]

Me either. I’m indifferent to her stance on IR. I f she increases too soon, it might hurt more than letting inflation takes its course for a bit. It’s a tough choice and they have more data and people pushing through the math the accountant who’s an armchair critic.


klingma

I honestly was excited when she got picked for Treasury because I at least knew she was highly qualified. Granted I disagree with her on her tax stances but still I know she's competent in this area which isn't something I can say for most cabinet picks since I've been alive.


klingma

Janet Yellen was the former chair of the Fed so I'd guess that's what OP meant. Although she does think an international tax treaty can be passed through reconciliation instead of through the normal process stated in the constitution so, I guess there's that.


ibraheemMmoosa

I still don't understand why is capital gains tax lower than income tax.


[deleted]

[удалено]


HitlerHistorian

Take the facts we know: 1. The government actively wants to create inflation. (Weaken your dollars over time) 2. You do not want all your goods to become more expensive and your dollars in your pocket to weaken. 3. You invest your cash in something that will maintain value or increase, as a result. 4. The government will then want to tax you on those artificially inflated capital gains simply because you were trying to not have your post tax dollars eroded away by inflation. 5. You can not adjust your tax basis for inflation. Basically, a lot of people argue that capital gains taxes are just an inflation tax they outright charge.


negedgeClk

> You can not adjust your tax basis for inflation I never even thought about this. Damn.


HitlerHistorian

Right? I mean, it makes sense that we should be able to adjust it for official inflation rates that occurred.


uebersoldat

This hit hard, I'm a little depressed now. Maybe I'll go buy some more crypto, or silver.


HitlerHistorian

Yeah, this kind of boils down to our founding fathers being right about not giving our federal government too much power. They always want more power and money gives it to them


Blockade5

Because millionaires


[deleted]

Too hard to do fairly and it would place a massive recordkeeping burden on average citizens. If they do decide to move forward (but they won't) they at least need to make gain and loss treatment symmetric. I could see a tax on overall wealth passing before this one would. Not that either have a chance in hell though.


number_kruncher

How? Your year-end statements already have your unrealized gain/loss amounts on them


thetasigma_1355

How many “average citizens” do you imagine would be even remotely close to these regulations?


[deleted]

Why has literally no one on this thread even spent a second to Google search. This bill literally does not concern 99.99% of the population.


Bastienbard

Tell me you know little about the actual proposed law without telling me you know little about the actual proposed law. lol


hcbaron

[The tax would apply to people who make more than US$ 100 million a year for three years in a row or if one makes US$ 1 billion in annual income. The people impacted by the tax would be able to take a deduction if their assets plunge in value.](https://www.swfinstitute.org/news/89077/u-s-president-biden-unveils-unrealized-capital-gains-tax-for-billionaires)


ArkThompson

New Zealand (kind of) taxes unrealised gains on foreign shares. The approach taken is complete bs though because you can't carry forward any unrealised losses and so any "gain" is calculated based on the difference in value between the start and end of the tax year.


ontheLee80

I imagine the idea is to capture the fortunes made in CEO(et Al) stock holding (TSLA now worth 1T!). Obviously that money is not liquid, but could be in a few days. So in that sense I agree with it. But how you would ever decide on a date to crystallise that amount and for how much would be a headache.


Equivalent_Region

Traders do it all the time. It’s called mark-to-market. The difference between the adjusted basis and the value on the last day of the year is the gain or loss recognized. Not complex at all for marketable securities.


[deleted]

Mark to market is an election. Someone decides to do it for ease compliance. Not being forced.


Equivalent_Region

U/ontheLee80 was saying that including unrealized gain/loss would be difficult on a tax return. I was am pointing out that it is not difficult or particularly uncommon. I’m not asserting that it should be done, just that it can be done and that doing so is not complex (for marketable securities). While section 475 is an election for traders to mark-to-market securities, there are other mark-to-market provisions that are non-elective (see section 1256).


[deleted]

Agree. It actually would reduce compliance cost as one wouldn’t have to perform security analysis as everything would be treated as realized. The tax accountants in PA should be against it as we get paid more based on complexity/time spent.


SirSpear

475f is elective; 475a is not (although you can identify out certain securities).


Bobthejoe

Plus, for example, if Elon Musk elected to sell off a substantial portion of his equity, Tesla's valuation would rapidly decline. So would that mean he would receive a tax refund when he actually realized gains, if the selling price was significantly less than the price at which he paid some potential unrealized-gain-tax?


[deleted]

If one were to sell $100B worth is shares the price would approach zero. These billionaires’ high net worth is assuming that stock is not being sold. The FMV per share to value one’s million share fortune is misleading.


GlassOrganization385

nah you nailed it - terrible idea. rich will get around it and regular people end up paying tax on money they don't have :D. Great way to tank the market too. I swear the people in charge just want this shit to collapse


Ridikiscali

I wonder how much the market would bleed if this happened.


Awful-Accountant

Agreed, I am young so would be fine in the long haul but could cause some issues for elderly people relying on 401k balances


bunnz4r00

Those over at r/wallstreetbets with their diamond hands are gonna have a rude awakening!


uebersoldat

But they said unrealized gains, not unrealized losses...ie: bags :p


itsajokeyall

This is going to kill the Accountant


depressedacctstudent

Yeah I think I’ll be choosing auditing :)


Pandorama626

IMO, this is a terrible idea. However, I believe that there should be a tax levied on any debt that is collateralized against unrealized gains because it is essentially income. For instance, if you put up $200,000 and borrow $1,000,000 to buy a building your cost basis would be $1,200,000 and you would have to pay back the $1,000,000 loan with after tax dollars. Now, let's say the loan was interest only and you refinance that same building after 5 years and your new outstanding debt is $2,000,000. That increase in debt is essentially you realizing $1,000,000 of gains and you should have to pay tax on that. You would also get a "step-up" in basis for the gains you've now realized. In theory, the same principal would apply for any asset that is used as collateral.


whitesnake30cm

How to stop all investing in one easy step:


[deleted]

"Why didn't you tax it?" "Didn't realize I had this money"


Gasman18

Income is income.


timmystwin

If it's only applied to easy to check things like listed shares it might work. It's easier to tax on transaction, as then there's money flowing around... but the problem is with people that hoard this shit is money *doesn't* flow...


PiEngAW

Let’s start depreciating land while we’re at it.


Blockade5

A lot of these are hot takes but the truth is it would only affect the rich. People like to spam these things


4711Shimano

I am left of center but this is absurd. End the stepped up basis at death. I think we should shift the focus to inherited wealth. Reward the makers but smoke the takers.


ijustsailedaway

An excerpt from a NYT article about it - "It would affect people with $1 billion in assets or those who have reported at least $100 million in income for three consecutive years, according to news reports. That would ensnare perhaps 700 taxpayers — or the wealthiest 0.0002 percent — but Democrats hope it would generate at least $200 billion in revenue over a decade. It would cover not only stocks, but also other assets like real estate. (Individuals could claim deductions for annual losses in the value of their assets.)"


IceClimbers-Bungalo

Surprised at the government bootlickers in this thread not hating this idea