CU professor calls “BS” on Romney’s 13 percent tax rate claim

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55. let's just take this one part:

>"You haven't actually realized your gain, your gain is effectively sitting in the Long A position. Until you close that position, you haven't realized the gain. You are still at $400 cash, with a position worth $150."


no, you have realized the gain. you have $400 in cash plus "long a" worth $150, THEN (IV) you sell "short a" again which gets you $150 cash proceeds for a total of $550 in cash plus offsetting "long a" and "short a" positions.


from a money perspective, you started off with $500, you now have $550, you've realized a $50 gain. you have offsetting long/short positions in "a" that always net to zero.

from a financial perspective, you've realized offsetting $50 gains and losses so no tax impact today, but "long a" has an unrealized gain of $50 (and the "short a" has no unrealized gain or loss).



the advantage overall is being able to realize a gain today while deferring the tax liability indefinitely.