Sure, provided we had an ironclad agreement that you would give my shares back to me anytime I asked.

No way!

The whole point was to test the proposition that the appreciated value of an asset wasn't really worth something until it was converted to cash. Which obviously isn't true, which is why you wouldn't give me your shares unless you could get them back. If they lacked value, you wouldn't care - but obviously they do have enormous value, even if they haven't been converted to cash.

It's not just semantics, though. It's pointing out that some people - including nearly all billionaires - are able to earn a tremendous amount of money while paying federal taxes at a much lower rate than the average salaryman. It's just not correct to say that they haven't actually earned anything, simply because under the current tax code those earnings are excluded from realized taxable income.

US Policy FAQ

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