Did I say mandatory? I meant optional! You’re “free” to die in a cardboard box under a freeway as a market capitalist scarecrow warning to the other ants so they keep showing up to make us more!
Put options are a specific investment vehicle. The OP is just making a blanket statement about unrealized gains. Many, many NOT rich people have unrealized gains. And there literally is NO value to tax. The investment could go bust and there is a loss, no gain at all. At what point in a long term investment is the tax assessed?
I’d say, when it is used as a vehicle for any financial transaction. If an employee exercising stock options pre-IPO has to pay tax on something that they are unable to get any financial value out of for at least 6-12 months, there is no legitimate reason that unrealized gains used as collateral should not be taxed. It’s just another way to shift tax burden onto people who actually work.
Ok. How much tax do they pay? And later when that stock quadruples and they sell, do they pay again or get a free ride for the extra it’s gone up because they’ve already paid? How many times to they get taxed on it?
I’m not ultra rich, but I have stocks that I’ve been purchasing for decades. I’ll be damned if it’s fair that I be taxed on a stock for a company that may go out of business before I ever see any profit. Why do we even assume it will go up? How about we assume it goes down and I get to write that off my taxes now and sort it out later if the assumption is wrong.
You’re literally trying to tax people on an imaginary number.
Except they are using it as collateral to accumulate excessive amounts of wealth, essentially replacing their income, tax free.
Which is why the first commenter mentioned the tax should be used on unrealized gains that are used as collateral. Not just the unrealized gains themselves.
Also, yea, when they sell, they pay a tax. Just like everyone else. That is a completely separate instance of wealth accumulation that is unrelated to the wealth accumulated by using those gains as collateral.
Don’t like it? Don’t buy stock and earn your money through income from a job instead. It’s that simple.
Though tbh I think this entire discussion on share and stock is pointless. Profit paid to shareholders is wage that should have been paid to a worker; if you don’t perform labor for that company, you shouldn’t have any entitlement to the profits made from that company.
But the point of a put contract would be to lock in the strike price for a duration determined by the expiration date. If put contracts were purchased for the duration of the loan, the potential risk of being unable to pay the bank due to depreciation would be mitigated.
Like how farmers buy puts on their commodity to protect themselves from a bad year.
It costs money to buy a put contract to protect the loan.
So if you need a 1mil loan, now you also gotta buy puts that’ll protect a downturn of 1mil. So now you gotta sell stock which will be taxed. It’s less than 1mil so you’re taxed less, but you will have taxes.
Edit: you could zero cost collar (puts + covered calls) your investment to protect it’s current value, but you’ll give up potential gains as well to get the zero cost part. But this would be a way to protect the value without selling. If the options get exercised though, you’d then have some taxes to pay.