Unrealized Capital Gains tax

[Running_Man]

The top Democrat on the tax writing committee has proposed taxing unrealized capital gains at the same rate as income is currently taxed. This would certainly get Warren Buffet to achieve his goal of being taxed more. Normally I would think this is the single least likely tax to get approved, however as this is proposed by the ranking Democrat this must have been discussed by other Democrats, would pretty much end the bull market. Of course 401K & Roths would be exempt from this, but would eliminate the advantage of holding non dividend paying stocks outside the 401K and bonds inside null and void.


Were this to pass would make the time between Jan 1st and April 1st an interesting time in the stock market, as the need to sell shares would be in that period. Would also bring in a heck of a lot of money the first year.

https://www.wsj.com/articles/top-dem...ns-11554217383

[Mdlerth]

So if the stock market goes up, they will tax your gains.

If it goes down, will the IRS return them?

[gwraigty]

Since unrealized capital gains are a moving target, how exactly would this work? Would this result in the same unrealized capital gains being taxed year after year?

[GrayHare]

"think I'll buy me a football team"

Sounds impractical as non-brokered, tangible assets, such as football teams, would need to be appraised annually. And if that type of asset is exempt, many more people will invest in them.

[gwraigty]

Quote:

Originally Posted by Mdlerth So if the stock market goes up, they will tax your gains. If it goes down, will the IRS return them?

Excellent point! My guess is no.

[Rianne]

I say leave Democrats out of this discussion. Just discuss the issue in itself. I wouldn't want to start a fire about the recent tax reform, tariffs/trade and everything else that could end the bull market. You've been here long enough to know a political post like that ain't going to last.

[MRG]

Is there a source for this political opinion?

[Andre1969]

The Wall Street Journal has an article on it, according to Google. I didn't click the link though, because it's most likely behind a paywall.

[Running_Man]

Quote:

Originally Posted by gwraigty Since unrealized capital gains are a moving target, how exactly would this work? Would this result in the same unrealized capital gains being taxed year after year?

You have a basis, a year end value and you pay taxes, your new basis is the year end tax basis. When you sell the stocks they go against the adjusted basis, quite simple actually.

Example Buy stock at 100 on 3/16/2019

At 12/31/2019 stock is at 130. Income is number of shares X (130-100) times the applicable tax rate.

[MichaelB]

Is this a bill under consideration or is this something mentioned in a speech or press conference?

Edit to add - the WSJ makes no mention of a bill, and I see nothing on Senator Wyden’s website, so my guess is it’s an ideal of his.

[braumeister]

Apparently just a proposal in a press release from Sen. Wyden.

As the WSJ article said:

Quote:

With Republicans in control of the Senate and the White House, Mr. Wyden’s plan stands little chance of becoming law.

[Popeye]

He knows it stands little chance but he is up for re-election in 2020. Just something he can pretend he is doing with his constituents. A normal Politician trick in both parties.

[OldShooter]

It's completely impossible. Think outside the stocks & bonds box: How would the value of an office building or a company I own be established for tax purposes? Suppose I am a minority owner; my share is almost valueless unless the whole asset sells.

My brother owns an undivided quarter of our deceased parent's lake home. His share is worth almost nothing, since no one would buy into a deal with three other partners that comprise a majority voting bloc, completely controlling the property.

I really wonder what these guys smoke. Maybe he's from a MJ state?

[COcheesehead]

Quote:

Originally Posted by OldShooter It's completely impossible. Think outside the stocks & bonds box: How would the value of an office building or a company I own be established for tax purposes? Suppose I am a minority owner; my share is almost valueless unless the whole asset sells. My brother owns an undivided quarter of our deceased parent's lake home. His share is worth almost nothing, since no one would buy into a deal with three other partners that comprise a majority voting bloc, completely controlling the property. I really wonder what these guys smoke. Maybe he's from a MJ state?

Those of us from a MJ state think clearly. Wait, what was the question?

[audreyh1]

Yeah, all those people start being taxed on their unrealized house appreciation are going to be so delighted to pay federal taxes on their house every year!

[steelyman]

I’m all for taking steps toward addressing income inequality but this is a really bad idea.

[haha]

Quote:

Originally Posted by steelyman I’m all for taking steps toward addressing income inequality

I am not.

[Running_Man]

https://itep.org/sweeping-reform-aim...dinary-income/

I think actually it is a good idea for the long run, but will be terrible in the short run if this is implemented.

[Running_Man]

Quote:

Originally Posted by OldShooter It's completely impossible. Think outside the stocks & bonds box: How would the value of an office building or a company I own be established for tax purposes? Suppose I am a minority owner; my share is almost valueless unless the whole asset sells. My brother owns an undivided quarter of our deceased parent's lake home. His share is worth almost nothing, since no one would buy into a deal with three other partners that comprise a majority voting bloc, completely controlling the property. I really wonder what these guys smoke. Maybe he's from a MJ state?

From the discussion of the tax proposal;
Certain assets that have a relatively easily defined market value, like stocks of a publicly traded corporation, would be marked to market. For other assets, owners would continue to defer paying income taxes until the asset is sold, but their income tax at the time of the sale would be increased to put the taxpayer in the same position she would be in if the asset had been subject to true mark-to-market taxation each year.

And homes already have an exclusion from capital gains, this is really going to be a simplification of the tax code.

[pb4uski]

This got my attention... the proposal would reduce or eliminate stepped up basis... though perhaps that is negligible if one is taxing on a mark-to-market basis since presumably the basis would increase to the last mark on which taxes were paid.

Quote:

A third type of tax break for capital gains is not mentioned in Wyden’s press release—the exemption from the income tax for gains on assets left to heirs. The Wall Street Journal reports that the proposal would “reduce or eliminate the benefits of that provision.”

But realistically it is DOA given GOP controlled Senate and White House so no sense fretting about it.