If someone takes a loan out against an unrealized gain, that should immediately trigger a tax event.

The real solution though is for the legislative branch to not be beholden to those same people and be able to quickly and effectively close tax loopholes as they are discovered.

▲

cluckindan 5 hours ago | parent | next [-]

That would instantly wipe out most leverage from the stock market, and from a casual bystander perspective, it would be a great thing.

▲

Terr_ 5 hours ago | parent | prev | next [-]

> If someone takes a loan out against an unrealized gain, that should immediately trigger a tax event.

How does that work when a house is used as collateral on a loan? Or artwork?

The loans are just a symptom, the problem is in the Estate Tax, and those loans are being used as a tool to wait out the clock and then dodge dynastic taxes entirely.

Remove the final loophole, and they'll stop playing weird games to get there all on their own. Plus it'll be way less-disruptive to everyone involves in regular loans for regular reasons.

▲

charcircuit 4 hours ago | parent | next [-]

There is not a loophole. When you die your loans get paid off first. The money to pay off these loans would be taxed. It could delay paying taxes until you die, but you can't escape it.

	▲	Terr_ 3 hours ago \| parent [-]
		> There is not a loophole. When you die your loans get paid off first. The money to pay off these loans would be taxed. You're missing the loophole, it's the the "step-up basis" rule, which dramatically affects the amount of tax on that liquidate-to-repay event. 1. Repaying 1 day before the owner dies: Liquidate $X, of stock, which 90% of it are capital-gains, heavily taxed. 2. Repaying 1 day after the owner dies: Liquidate $X of stock, which is now considered ZERO gains, almost no tax. This massive discontinuity also applies when it comes to the transfer of stock to inheritors, and any taxes they might pay for liquidating it. A day before, they get a stock that "has grown X% in Y years." A day later, they get a stock that "has grown 0% in 0 days." > It could delay paying taxes until you die, but you can't escape it. But they did escape the taxes, or at least the "gains" portion of them! For decades, the unrealized gains in growing assets were "eventually" going to happen someday... Until, poof, all gains have been forgotten.

▲

direwolf20 44 minutes ago | parent | prev [-]

The taxable value is exactly how much you borrowed against it!

▲

njarboe 5 hours ago | parent | prev [-]

Agreed. This would get rid of borrow against gains to spend tax free. But also just get rid of the income tax, it is the worst way to tax, and do a land value tax.