On unrealized gains, wait, what??

robotresearcher 2 hours ago | parent | next [-]

Why is this shocking? Surely if you hadn’t grown up with the very technical idea of unrealized gains, this would seem totally normal. The surprising thing is that we let ourselves be convinced in the past that making money with money should be tax advantaged compared to making money with labor.

Unrealized gains are gains.

	▲	prewett an hour ago \| parent [-]
		Do you have to pay tax on unrealized gains with realized money? A classic problem with exercising employee stock options and holding the stock is that you have a tax event on the unrealized gain, but if the stock drops substantially, you still owe the tax money on the unrealized gain, but you cannot sell the stock for enough to pay for it. This happened to a lot of people around 2001. Paying for unrealized gains with realized money is not a situation anyone want to be in.

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retired 2 hours ago | parent | prev [-]

Yes.

Say you have €80k in investments. Markets go up, in one year time your investments are worth €90k. You did not sell.

That means you had €10k in unrealized capital gains. Subtract the €1800 per person threshold. €8200, 36% tax is €2952 tax to be paid at the start of the year.

Losses give you tax credits redeemable against future capital gains (not against income tax from employment)

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kcb 2 hours ago | parent | next [-]

How does that even work? What does it apply to? Say I own a 100% share in a business, each year does the government appraise it and pretty much require me to divest a portion of it to pay the tax?

Unrealized capital gains taxes are crazy all in an effort to own the rich or something. Meanwhile the people they're perceived as targeting have all the resources to avoid it.

	▲	retired 2 hours ago \| parent [-]
		Yes, you are supposed to either sell part of the stocks to cover the yearly tax or you need to dip into your savings account to find money to cover the tax. I don't know about non-publicly listed companies, I assume you indeed need to appraise yearly. The rich don't pay these taxes as the unrealised capital gains tax is only for private individuals, not companies. The rich have their assets in companies / shells.

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prewett an hour ago | parent | prev | next [-]

A 36% tax?! Nobody's going to invest in that environment, since the taxes will really sap your effective compounding rate. That's a great way to push all your finance people out of the country.

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jay_kyburz 2 hours ago | parent | prev [-]

Assuming you're not going to somehow avoid paying your tax when you do eventually liquidate, paying year to year is not that crazy.

Paying tax on money you make because you already have money is far better than playing tax on your time you sold for salary.