The tax rules stopped me!
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Top Democrat's proposed tax on unrealized capital gains would be devastating for financial markets
- Thread starter Banjo
- Start date
The tax rules stopped me!
Sorry, I don't understand. You buy BRK-B and hold for 30 years. You pay no capital gains until you sell it. Your money compounds tax-free and you never pay a cent in taxes until you sell (BRK-B does not issue a dividend although I think they recently paid out a special dividend or some kind of distribution which would have been taxable).
I actually like a form of this tax. Why do I have to pay tax because I turned over my investment from MSFT to CSCO, while Bill Gates keeps compounding his in MSFT for 30+ years? Does anyone not understand the impact compounding tax-free could have done for me?
This statement takes on a view that MSFT not majorly failing for 30+ years was an inevitable outcome with no risk.
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What I mean is this. When I sell my MSFT to immediately buy CSCO, I pay taxes. Why? My CSCO holding is every bit as risky going forward as MSFT going forward (from the same point). So why justify deferring taxes on basis it is not realised? I haven't touched the money realised from MSFT sale!Sorry, I don't understand. You buy BRK-B and hold for 30 years. You pay no capital gains until you sell it. Your money compounds tax-free and you never pay a cent in taxes until you sell (BRK-B does not issue a dividend although I think they recently paid out a special dividend or some kind of distribution which would have been taxable).
What I mean is this. When I sell my MSFT to immediately buy CSCO, I pay taxes. Why? My CSCO holding is every bit as risky going forward as MSFT going forward (from the same point). So why justify deferring taxes on basis it is not realised? I haven't touched the money realised from MSFT sale!
This is the basis for like-kind exchange rules which let you defer taxes.
Why isn't like-kind exchange allowed for stocks and bonds? There's a case to be made that it should be, at least for bonds - but it isn't.
Either way, the money has to be taxed at some point. One option is the current system, i.e. tax capital gains at the time of sale when the value has by definition been firmly established and the taxpayer has cash sale proceeds available to pay the tax. The alternative system proposed means forcing the IRS to spend a gazillion man-hours every year haggling over the valuation of every asset held by everyone, exposing taxpayers to enormous cash liabilities for unrealized gains on assets which may be illiquid or difficult to sell (already a problem with the estate tax), and creating a mile-wide loophole for taxpayers to offset realized cash gains, or gains in transparently priced readily marketable assets, with mark-to-fantasy unrealized losses. It's just an insane idea.
If you want that, invest in real estate instead. It is called 1031 exchange.What I mean is this. When I sell my MSFT to immediately buy CSCO, I pay taxes. Why? My CSCO holding is every bit as risky going forward as MSFT going forward (from the same point). So why justify deferring taxes on basis it is not realised? I haven't touched the money realised from MSFT sale!
What a wonderful idea: Using unrealized losses to offset realized gains.This is the basis for like-kind exchange rules which let you defer taxes.
Why isn't like-kind exchange allowed for stocks and bonds? There's a case to be made that it should be, at least for bonds - but it isn't.
Either way, the money has to be taxed at some point. One option is the current system, i.e. tax capital gains at the time of sale when the value has by definition been firmly established and the taxpayer has cash sale proceeds available to pay the tax. The alternative system proposed means forcing the IRS to spend a gazillion man-hours every year haggling over the valuation of every asset held by everyone, exposing taxpayers to enormous cash liabilities for unrealized gains on assets which may be illiquid or difficult to sell (already a problem with the estate tax), and creating a mile-wide loophole for taxpayers to offset realized cash gains, or gains in transparently priced readily marketable assets, with mark-to-fantasy unrealized losses. It's just an insane idea.
I think the idea might be good. Don't we agree that that futures taxation using year end mark to market accounting with 60/40 gains is good. I do not think the idea of encouraging investment with long term capital gains is needed any more. I see two advantages. It discourages company founders from IPOs with non voting shares and it makes earning income from work and capital investments value more in balance.