No. of Recommendations: 1
Let's say someone buys $500k worth of a volatile stock like Coinbase. In a year it's worth $1M, and we tax the $500K unrealized gain so they owe, let's say, $100K in taxes. They sell $100K worth of stock to pay the taxes, so they now have $900K worth of stock. The next year Coinbase falls 50%, so they now have $450K worth of stock, or less than they started with. They also experienced a $450K unrealized loss. How does that get treated? If their salary is $200K, do they get to write off the $450K loss against their salary, so they now owe no taxes on their salary? And still get a refund?
Yeah. How would this work in practice. In the simplest case, say, I have plenty of liquid cash in a bank account to pay any future taxes, and have no other taxable income except interest earned on that cash.
But I also have 500k in a publicly traded stock.
In 2024, that stock appreciates in value to 1 million and I don't sell any of it. So, my unrealized gain is 500k, and I pay some tax on it.
In 2025, the stock depreciates in value back to 500k. So I pay no tax, but then do I get to "bank" that loss to offset next year's unrealized gain?
In 2026, the stock again doubles in value to 1 million and I have to pay tax on the 500k unrealized gain. Do I get to use the loss from the previous year to offset it?
Rinse and repeat.
