If the Supreme Court rules for the government in Moore v. U.S., all unrealized gains will be taxable under existing law.
Imagine receiving a tax bill for the appreciation on your investments, including the equity in your home, before you’ve even sold them. It could happen if the government has its way at the Supreme Court.
During Tuesday’s oral arguments in Moore v. U.S., the justices focused on the question of whether the 16th Amendment’s authorization of “income” taxes allows for the taxing of unrealized gains. It has long been understood that income taxes apply only to realized gains—those that have been actually received by the taxpayer, or effectively so such that the taxpayer has control over the funds, which is called “constructive realization.”
Out of the tax code’s nearly 10,000 provisions, the government seized on a handful it contends would be imperiled by a holding in the Moores’ favor. The Moores argue these provisions could be justified either based on constructive realization or as excise taxes. But no one acknowledged the maelstrom that would descend on the tax code if the court accepts the government’s position.
Continue reading the entire piece here at The Wall Street Journal (paywall)
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Ilya Shapiro is a senior fellow and director of Constitutional Studies at the Manhattan Institute. Follow him on Twitter here.
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