We can't tax unrealized gains because (besides being unrealized, and can thus theoretically be wiped out) their value is purely theoretical, on paper only. However, why, then, are they suddenly good as collateral for a multi-billion dollar purchase? If the value of the shares is vulnerable to a tax authority, it should be just as vulnerable to a lending entity. I realize that a lending entity can take market positions to cover their loss risk, but that only makes sense if the collateral shares are their property to play with. That only becomes the case if the loan is defaulted on.
Actually, if I were a lender, I would never agree to such conditions, but apparently that is standard practice. If an unrealized gain is too nebulous to be taxed (which I agree with), then how come someone finds it solid enough to lend a few billion against it?
From my ignorant, uneducated point of view, I would see this as an either/or situation. Obviously, I don't don't know the ins and outs of the mechanics of high finance, so I'm sure there is an explanation of how a lender insulates itself against a loss, but I don't get how a lender can play with the value of the collateral if no title of ownership has passed. And yet, the lender would HAVE to have that option to secure the value of the loan as long as it is outstanding.
Luckily for me, I will never be confronted with such intricate financial intrigue, and I don't own stock in any companies that play that game. According to some friends back in Texas who have made a lot of money investing in Tesla, I have been way too conservative in my practices. However, I don't have the kind of money that would have made me millions even if I HAD invested "wisely," So it's just a spectator sport for me.
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