Posted on Jun 30, 2023
Unrealized Gains Supreme Court Case Could Change Wealth Taxes
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"Taxation of unrealized gains is at the core of a case that the U.S. Supreme Court on Monday agreed to take up and that could change the way wealth is taxed in the U.S. The plaintiffs in Moore v. United States argue that a mandatory repatriation tax, introduced by the 2017 Tax Cuts and Jobs Act (TCJA), is unconstitutional."
Unrealized Gains Supreme Court Case Could Change Wealth Taxes
Posted from kiplinger.com
Supreme Court
Investing
Taxes
Wealth
Posted >1 y ago
Responses: 2
No surprise that this ended up at the Supreme Court. Ever since there was a discussion about taxing unrealized gains at the federal level, there's been broad agreement that it borders on being Constitutional and will end up there.
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Unrealized gains are just that: unrealized. They are purely hypothetical. If the company tNks tomorrow, and they end up selling for a loss, they are taxed on NEGATIVE income. Is the government going to give that money back? I highly doubt it.
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LTC Eugene Chu
Government does not give the money back...but does allow you to harvest losses on your taxes.
https://www.nerdwallet.com/article/taxes/tax-loss-harvesting
https://www.nerdwallet.com/article/taxes/tax-loss-harvesting
Tax-Loss Harvesting: What It Is, How It Works - NerdWallet
Tax shelters aren’t just for the rich. Everyday investors should use the strategy called tax-loss harvesting too. Here's how it works.
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SFC Casey O'Mally
LTC Eugene Chu we think you are going to make a million dollars on that investment. Give us $200,000 of it as your "fair share."
Oh, sorry, you ended up losing $50 on it. Sorry you are out the $200,000, but you can deduct $50 from this year's income!
This is the problem with unrealized gains.
The government just used theoretical money to steal real money.
Oh, sorry, you ended up losing $50 on it. Sorry you are out the $200,000, but you can deduct $50 from this year's income!
This is the problem with unrealized gains.
The government just used theoretical money to steal real money.
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COL Randall C.
LTC Eugene Chu - Tax loss harvesting wouldn't apply as that only applies to realized capital gains or losses.
With a (massive) rewriting of the tax code (assuming it is rule Constitutional to tax unrealized gains), you COULD (at least theoretically) be fair about taxing unrealized gains and refunding unrealized losses. Assume everything is at 20% - have $1M unrealized gains, pay your $200k in taxes. Have a $1M unrealized loss, here's your $200k back.
It would be a nightmare of overhead in tracking and if they every ventured outside of stocks into stuff like real estate, ownership shares of corporations (instead of stock), etc. Stock has a market price - it was such-and-such on 1 JAN and it now this price on 31 DEC. For everything else that doesn't have a defined price it would all have to be appraised.
With a (massive) rewriting of the tax code (assuming it is rule Constitutional to tax unrealized gains), you COULD (at least theoretically) be fair about taxing unrealized gains and refunding unrealized losses. Assume everything is at 20% - have $1M unrealized gains, pay your $200k in taxes. Have a $1M unrealized loss, here's your $200k back.
It would be a nightmare of overhead in tracking and if they every ventured outside of stocks into stuff like real estate, ownership shares of corporations (instead of stock), etc. Stock has a market price - it was such-and-such on 1 JAN and it now this price on 31 DEC. For everything else that doesn't have a defined price it would all have to be appraised.
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SFC Casey O'Mally
COL Randall C. My concern is when something is taxed for an unrealized gain, and then becomes a realized sell at cost (or very near cost). Or vice versa when taxed as a loss and then sold at break even.
The example above highlights the concern.
It could possible be rectified by showing a at cost sale on an unrealized gain as a realized loss (due to being taxed at the higher rate), but even that only covers so much ground.
The example above highlights the concern.
It could possible be rectified by showing a at cost sale on an unrealized gain as a realized loss (due to being taxed at the higher rate), but even that only covers so much ground.
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