The American Spectator reports on a case before this year's Supreme Court that, if decided incorrectly, could be trouble for most of us. The case is labeled Moore vs. United States.
Moore vs. United States litigates a government attempt to tax unrealized income. What is a tax on unrealized income?
It would, in theory, permit the IRS to tax an increase in the value of your home as a capital gain — whether you have sold it or not.
Or tax the gains in stocks or a painting or IRA which have risen in value. As you know if you file your taxes, such things are not now taxed until you sell (realize) them, exchange their ownership for money.
Historically, the IRS hasn’t taxed shareholder “earnings” until they receive dividends or sell their stock for capital gain.
Prices mostly rise, but sometimes fall. What I want to know it this. Suppose the government taxes an increase in stock prices. Will they give you a rebate if the stock prices later drop? If your painting loses value in the market? If the market value of your home declines? If any of these things happen while you still own the asset? I don't see them doing so.
Taxing unrealized income is a road our government should not travel.
