[robotresearcher]

Why is this shocking? Surely if you hadn’t grown up with the very technical idea of unrealized gains, this would seem totally normal. The surprising thing is that we let ourselves be convinced in the past that making money with money should be tax advantaged compared to making money with labor.

Unrealized gains are gains.

[prewett]

Do you have to pay tax on unrealized gains with realized money? A classic problem with exercising employee stock options and holding the stock is that you have a tax event on the unrealized gain, but if the stock drops substantially, you still owe the tax money on the unrealized gain, but you cannot sell the stock for enough to pay for it. This happened to a lot of people around 2001.

Paying for unrealized gains with realized money is not a situation anyone want to be in.

[robotresearcher]

I was thinking of 'real' holdings rather than options that don't have a liquid value. Not all unrealized gains are the same. Thanks for pointing out the complexity.