it’s long term capital gains he never realized in a taxable account.

Sure. Never realized, never pocketed, never income.

The point is he will never have received that money. He got no benefit from it. I'm sure he never even borrowed against it to get an indirect benefit, which many a paper bazillionaire has done. (something for which I think there is perhaps a case for some tax liability--perhaps encumbering an asset should trigger a taxable event as a sale would do, up to the value of the consideration received?)

Economically, for him and his pocketbook, it's as if he bought a car for $1000, which later became worth $1,000,000 making him feel great, but was then stolen. My stance is that should not be deemed taxable in-come because it never came in, for him.

There are lots of places the asset could go next, and there are interesting conversations one could have about whether and to what extent those various destinations should get the whole amount or an after-tax amount. But he will never have had any income from it. I think a rule of "no income, no income tax" is a pretty sane starting point.

Jim

Berkshire Hathaway FAQ

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