which is why this part should never have been taxed. Until there's a sale of those shares, the price is merely an estimate and thus is not and should not be considered the FMV.
Not sure what you mean by "should" here, but the IRS definitely considers it to be a gain that you have to pay taxes on, regardless of whether you can sell the shares.
Yes that's exactly the problem. Why does it seem okay for the IRS to demand a million dollars from someone who has no way to pay that? Like, doesn't that seem like something is wrong/broken somewhere? There's a cottage industry of loan sharks who will lend people money so they can pay, but how about instead the IRS not take money from people who don't yet, and may not ever, actually have the money to pay, until they, y'know, have the ability to pay off that tax bill.
Would I own tax then on the classic car I bought 20 years ago which is now worth 10x the buying price and I can actually sell it for that, even though if I won't sell it?
> I can take any financial gain and turn it into a "paper profit"
if you did, you would not have access to make use of those "paper profits" for consumption - it would remain an investment. This makes taxing it egregious imho.