While there's a case to be made that taxing unrealized gains would be "fair", it seems a logistical nightmare. I can't see it being done without armies of government-approved appraisers all trying to value all these properties and businesses, and as was mentioned earlier, works of art, baseball card collections, etc, etc.

Yes, I think it’s a dumb idea just based on the practicality of it, not to mention the after-the-fact enforcement which would be near impossible.

The easiest way to capture the revenue would be to eliminate the “stepped-up” basis for inheritance. Tax it just as though the original owners had cashed out and paid the tax. That would likely change some behavior as people spent more rather than husbanding it down to the last second so they can gift it to children or foundations or whatever, and it would put a relatively stable revenue source on tap for needs.

I know there will be some objections from the Harry Srs who want to pass the hardware store down to Harry Jr, but thems the breaks. Put Junior on the payroll early enough and let him save for the upcoming taxes, or have him take a loan and pay it off with the proceeds of the business which, after all, he’s getting for free.