Wednesday, February 1, 2012

When is gain taxed by the IRS?

What is a realization event?

There is no tax on the gain until the occurrence of a “realization event”, such as a cash dividend or other types of payouts considered by the IRS.  Although the cash dividend does not make the owner any richer, it serves as the trigger for taxing the enrichment that the tax system had previously ignored.

This is mainly justified by the tax policy of Administrative ease for the Internal Revenue Service's enforcement of tax law.

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