Capital Gains Realization

About Capital Gains Realization

The debate over taxing unrealized capital gains intensified in 2021 when Senator Ron Wyden proposed the Billionaires Income Tax. Under current law, capital gains are taxed only when assets are sold, allowing wealthy individuals to defer taxes indefinitely by holding assets. If assets are held until death, the basis is stepped up to market value, eliminating capital gains tax entirely. Wydens proposal would have taxed unrealized gains annually for taxpayers with over 1 billion in assets or over 100 million in income for three consecutive years. The proposal did not advance. The debate highlights how the realization requirement benefits wealthy taxpayers who can borrow against assets instead of selling them, a strategy known as buy borrow die.