القائمة الرئيسية




Bitcoin HODLers live by the words of the 1987 Rick Astley hit song, “Never Gonna Give You Up.” Many have held their stack for years, through steep price declines, only to see the price ratchet up to new highs every year. In contrast to short-term trading, it’s a buy-and-hold investment strategy that seems to be working.

Treasury Secretary Janet Yellen announced on October 23 that a proposed tax on unrealized capital gains — yes, gains from investments that haven’t even been sold yet — could help finance President Biden’s now scaled-back $1.75 trillion social spending bill. Senate Finance Committee Chairman Ron Wyden has come up with the idea that would be a landmark change to the way U.S. citizens are taxed.

If Yellen and the U.S. Congress have their way, wealthy investors may be taxed on those unrealized gains, the price appreciation of their assets. The tax would apply to all “property,'' which includes stocks, real estate, gold and even cryptocurrencies like bitcoin. Cryptocurrency is not looked at by the IRS as currency, but rather as property. Every time you sell or spend cryptocurrency, you have a taxable transaction resulting in either a capital gain or capital loss.

The effort would be an attempt to squeeze more taxes from America’s wealthiest families, by assessing a tax on assets that have appreciated but not yet been sold. Wyden’s plan would

apply to those with over $1 billion in assets or those who experience three straight years of income over $100 million. Income is easily verified from tax returns, but assets, well, that becomes a bit more complicated. Some assets are priced publicly, but many aren’t.

Some members of Congress are apparently not thrilled that some wealthy people can receive little or no current income, pay no taxes, and yet have their wealth grow exponentially over time. Currently, the uber-rich can hold assets that are appreciating, not sell any of them, but finance their lifestyles by borrowing against their vast holdings. It makes perfect sense since we’re in an extended period of near-zero percent interest rates. Not surprisingly, Congress is not happy about that.

It should be noted that the plan to tax unrealized gains is not the same as a “wealth tax” of the kind proposed by Senator Elizabeth Warren. A wealth tax would be levied on the value of all assets, not just those that have appreciated in value. The two taxes are similar, but definitely different. House Speaker Nancy Pelosi, herself one of Congress’s wealthiest investors, said last Sunday, “We will probably have a wealth tax,” showing she doesn’t understand the difference.


As a Certified Public Accountant by trade, I think I can foresee many complications that may result from the imposition of a tax on unrealized capital gains.

1. Valuations. Every asset owned by these wealthy folks would have to be valued, every single year. Valuing a closely-held business is both a costly and time-consuming process. There is no way that these valuations could be done in a timely manner each year to be included in a tax return filing. (Think of someone like former President Donald Trump, who has interests in over 500 closely-held businesses.)

2. Subjectivity. Not all assets are easy to value. Sure, everyone knows how much Jeff Bezos’ stock in Amazon appreciates each year, and ditto with Elon Musk. Bitcoin holdings, too, are easy to value. These assets are all publicly traded. That’s low-hanging fruit for this kind of a tax. But, as with the closely-held businesses mentioned above, it’s also not easy to value assets such as artwork, wine collections, yachts, and airplanes. Who’s to say what a Picasso piece is worth this year? A lot of subjectivity involved, for sure. Real estate as well is tough to value and subject to lots of factors.

3. Reporting. How would reporting of the value of these assets be done? Brokerage houses would be required to issue forms detailing the fair market value of all assets at each year end, which would no doubt prompt some pushback. Would other custodians have to report as well? Cryptocurrency exchanges, for example? Keep in mind that many U.S. citizens buy their cryptocurrency on overseas exchanges, which would not be subject to any U.S. Treasury regulations. Not to mention the millions of holders who self-custody their bitcoin! The IRS might have no knowledge of this.

4. Liquidity. Taxpayers like Jeff Bezos and Elon Musk have substantially all of their net worth in the stocks of the companies they run. To pay an annual tax on the value of those stocks, every year, would no doubt require selling off some of the holdings. Asset markets may have to go through an annual trimming sell-off period in order to generate cash for the new tax. The IRS currently only accepts U.S. dollars for tax payments. They won’t take bitcoin or other cryptocurrencies either. Thus, the tax would prompt some selling of digital assets as well.

Where would all of this be headed? Audits: this would lead to long, drawn-out, complicated tax audits, with extended litigation, appeals, and settlements. The wealthy can and do hire the best tax lawyers available, so this process would continue for years without resolution. Congress may be counting on the tax revenue to flow in smoothly to the government coffers, but there is no way it will play out that way.

Here’s another question surrounding such a tax. Would unrealized losses count in the taxpayer’s favor? Would those assets declining in value be netted against those that are appreciating, thus taxing the aggregate net increase in wealth? That’s not clear yet.

Would declines in value be able to be carried back against increases, thus generating huge tax refunds in future years? The bitcoin bear market of 2018 comes to mind, when the price of one bitcoin dropped from over $19,000 to about $3,300, an 80% drop in value. (Think, also, about years of stock market crashes, a la 2008–2009.) No doubt, the Treasury won’t want to cut refund checks for the wealthy. These are enormously complicated matters that apparently have not been clearly thought out.

Another huge issue involving a proposed tax on unrealized capital gains would be enforcement. The Internal Revenue Service can’t even answer taxpayers’ or tax professionals’ phone calls right now. They can’t respond to correspondence within a year. Where would all of these enforcement agents come from? Not to mention, every business in the country is facing a shortage of workers.


The 16th Amendment to the U.S. Constitution authorizes the taxation of “income,” and that wording has resulted in a long history of court cases involving various forms of taxation. Case law has found that something defined as income has to do with the person having complete control over the source of money and being able to use it as he sees fit. That doesn’t really fit in the situation of unrealized gains. Indeed, even to pay this tax, some liquid cash from the investment would be needed.

The text of the amendment, when taken literally, would seem to allow only taxes on income, and certainly not wealth. Whether an increase in wealth, on paper, represents income, will be a question for the courts.


The Revenue Act of 1913 imposed an income tax on individuals with an income of over $3,000. Adjusted for inflation, that’s about $75,000 in today’s dollars. The tax affected approximately 3% of U.S. citizens. Obviously, the income tax grew and grew until it affected over 50% of citizens, and Social Security and Medicare taxes were added, so that just about

Taxing a few hundred billionaires is one step, but like the income tax, the real money is with the broader public. Tax increases on the wealthy can only bring in so much.

Here’s a scary thought: Could this tax one day be applied to the value of people’s retirement accounts? Currently, that’s not on the table of Congress, but some members have expressed outrage over the vast sums that some wealthy folks have amassed in IRA accounts.


Thus far, there has been no talk of this tax being applied to corporate assets. Rather, there is a proposal floating around that would impose a 15% minimum tax on all corporations, as the former Alternative Minimum Tax was repealed in 2017.

An unrealized capital gains tax on corporate assets could hit those with real estate especially hard, but companies with bitcoin also come to mind. Michael Saylor’s publicly-held company MicroStrategy is currently sitting on unrealized gains of over $2 billion from its bitcoin stack. The same for Tesla and Square, and many others.

If this tax on unrealized gains was not applied to corporations, then I can see some bitcoin whales putting their stack into a corporation, with the help of some crafty tax attorneys.


At this point, there’s no indication of what the chances are that this tax will pass Congress. With Democrats holding slim majorities in the House and the Senate, it seems quite possible. And, with the spending bill already trimmed down from its original $3.5 trillion price tag, chances look better. Votes in the House and Senate are expected before Thanksgiving.