[tuckermi]

I am confused as well. With that said, there is a comment from 'dragonwriter' further up in the thread that I think touches on this:

"In a tax system with progressive marginal rates on annual income, treating income resulting from action over multiple years as earned in the year realized results in a artificial increase in the tax burden on those with that kind of income pattern. So, there's a sense in which treating capital gains earned over multiple years differently than capital gains earned over a single year or less (the latter taxed as general income), given the progressive nature of the tax system."

[ska]

Well sure, one can argue with the goals of the policy (or if it is effective, or what the unintended consequences are), but these things are not "arbitrary", and tax codes are full of them.