• What are unrealized gains?
  • Will these drastic measures prove to help or hurt America in the long run?
  • What does this mean when filing taxes?

While we wait and watch whom Biden installs into positions of power, it’s important to consider the possible repercussions that could come from his new cabinet policies. Biden’s newly appointed U.S. Treasury Secretary, Janet Yellen, is currently considering some shocking policies. One consideration: taxing unrealized capital gains, also known as “mark-to-market taxation.”

What is an unrealized capital gain?
Unrealized capital gains, put simply, is the increase in the value of an asset that has yet to be sold. It is the theoretical profit existent on paper. For example, perhaps you purchased a house at $300,000 and sold it for $350,000. If you still owned the house when it was valued at $350,000 as opposed to selling it, you would have grossed $50,000 in unrealized capital gains. If you sold the house when it was valued at $350,000 the $50,000 gain would then be “realized.”

How will Yellen’s new tax policy affect me?
Yellen claims that she wants to “act big” to save the economy now and worry about the debt later; but what it sounds like she’s saying is: take hardworking American money now and worry about the consequences later.If Yellen’s outlandish policy ends up seeing the light of day the only way investors would be able to avoid taxation would be to not make any profit, which isn’t exactly the best investment strategy. This also brings up an important question: we know investors would get taxed upon gains, but what about losses? Would you qualify for refunds if the housing market goes down for the year?

The tax on unrealized gains wouldn’t only affect homeowners, but the stock market as well. Would any of your shares really increase in value, or would the gains you think you’ve made almost instantly be taxed?

There are a lot of questions that we can field from this possibility and not a lot of answers right now. Fortunately, DSJCPA is keeping a close eye on the latest news and changes in tax policy.

Yellen about Tax on Unrealized Gains (dsjcpa.com)