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This implies that until the asset is sold, the owner of stocks or property that improves in value does not have to pay taxes on the increase.
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Only when capital gains are realised, which requires selling the asset, are they subject to tax1.
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The household's effective tax rate is 12 percent when unrealized capital gains are included in income, which is lower than the suggested minimum tax rate of 20 percent.
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Now, individuals who are subject to a tax on unrealized gains are not limited to those who own illiquid assets; it would also apply to those who have significant holdings of publicly traded securities.
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