Taxing wealthy people’s unrealized capital gains is not closing a 'loophole'

financialpost.com:

When should income be taxed? Put another way, especially in the context of business income, how is profit for tax purposes computed?

It seems like a straightforward question, but it’s not. It’s been the subject of a number of textbooks, numerous court cases and Canada Revenue Agency administrative positions. In Canadian tax, one of the landmark writings on this subject was Timing and Income Taxation: The Principles of Income Measurement for Tax Purposes, written in 1983 by eminent professor Brian Arnold. That paper was updated in 2015 by Arnold and a cast of superstar tax practitioners into a book, and both are staples for any serious Canadian tax practitioner.

Why do I mention this? Well, for non-tax practitioners, it’s often taken for granted that you only pay tax when you receive something in exchange. For example, if you provide your labour and get cash in your bank account, you’re only taxed then. If you purchase a cottage property and then sell it for a profit, the realization date is when you need to report a taxable capital gain.

However, our taxing statutes go much beyond those simple examples. For example, in computing business profits, most businesses (with the exception of farming and fishing) must record profits on an accrual basis, not on a cash basis. In other words, if you sell something but have still not been paid, you generally (with some exceptions) must record that sale in your income. Inventory and capital purchases are not an immediate deduction. The above-mentioned paper/book dives into a lot of detail with respect to these issues.

I try to distil the complex timing and profit computation issues when explaining them to people I mentor into a bite-sized concept as follows: if there has been an