Until that boat is in his Driveway. Mr Savvy should not be taxed on the potential of him buying it.

Why not? If one neighbor earns $1M in wages, and the second neighbor earns $1M through appreciate investments, they've both earned $1M regardless of whether either buys a boat or not. The $1M reflected in Mr. Savvy's brokerage statement is no less real than the $1M reflected in the neighbor's bank statement. They both have the same amount of wealth - something that is readily apparent if the neighbor takes his $1M in dollars and invests it in the same stocks as Mr. Savvy, so they both have $1M in the same securities, just with a different basis. The neighbor's wealth hasn't dropped by $1M simply because he invested in the market, subjecting his assets to some non-zero risk of falling.

Unrealized gains aren't "abstract." They are real, concrete increases in your wealth - and that wealth increase isn't zero just because it's held in stocks with a low basis instead of a bank account (or an after-tax portfolio with a high basis).

Berkshire Hathaway FAQ

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