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points by karmajunkie 3 days ago | 0 comments

as soon as wealth of any sort is collateralized the tax code should treat it as liquid and tax it. preferably heavily.

While I agree, there's something that feels unfair about double taxation.

Here's an idea:

- Capital gains become taxable when you borrow against an asset, proportionate to the amount borrowed. - The gains which have already been taxed are added to the asset's cost basis, so they're not taxed again on sale (basically same as sell and rebuy).

If the shares subsequently tank, you can carry forward the loss against future gains on the same asset, but can't claim a refund or offset unrelated gains (to avoid incentives to transfer value to a different company and dodge liability, etc.)

For example:

2000: I buy $1M of S&P 500 ETFs.

2026: They're worth $8.5M ($7.5M gain). I borrow $2M against them, effectively realising ~24% of the gains (~$1.75M), and pay CGT on that amount. My cost basis increases to $2.75M.

2030: I sell up for $10M. Instead of paying CGT on $9M of gains, I pay it on ~$7.25M, since the rest was already taxed.

[–] camgunz 3 days ago

It seems easier to just tax the loan as income unless it's a margin investment.

[–] otoburb 1 day ago

That would destroy the housing market in terms of an inability for many potential homeowners to finance a property purchase. Although this would probably be welcome news for younger and/or less-resourced potential owners since property prices would be decimated and would therefore become much more affordable.

Perhaps for the initial purchase this type of income-based approach on debt financing could be waived as an exemption, and could apply to financial products like home-equity line of credit (HELOC) loans.

[–] camgunz 1 day ago

I guess I view a mortgage as a margin investment

[–] whatever1 3 days ago

Yeah if you borrow against it, IT IS REAL. The lender considered it real!

[–] mindslight 3 days ago

Exactly. This is how IRAs already work. Taking a loan (beyond your basis) should count as realized income (while also adjusting your cost basis).

[–] silverFork 3 days ago

If they forced sell any stock that is has been held for more than a year on random dates and bought them back automatically, the whole scheme will be done for.

[–] rustyhancock 3 days ago

The problem of tax law is unintended consequences and subsequent more laws and loopholes and endless complexity to get it "right".

I borrowed against my house to buy it. Why shouldn't I be taxed when I got my mortgage?

[–] TheCoelacanth 2 days ago

If you are borrowing against unrealized appreciation of more than the $250k that is exempt for a primary residence, you should be.

If you are borrowing to buy the house in the first place, then all of the capital gains have already been taxed, so it's not analogous to this scenario.

[–] rustyhancock 1 day ago

But this proves the point, a simple rule becomes 3 rules immediately.

Depending on the housing market a property price could rise that much while still under mortgage and not everyone pays mortgages off in term.

The fundemental issue with tax law imo, is that tax lawyers write it and the spend years in the dark offering their services to bypass it.

It would be like there being a category of specialist lawyers who openly offer hidden options to murder people.

It really is quite bizarre in my opinion.

[–] TheCoelacanth 17 hours ago

That's not new rules. It's just a basic application of existing rules.

We already have definitions of what realized and unrealized capital gains are and we already have the rule about how much capital gains on a primary residence are exempt from taxation.