In the US, most recent studies of asset portfolios suggest that 60-70% of notional asset value has no liquid market. We already generate fictitious valuations for compliance purposes in many cases (e.g. 409A) that no one confuses with being representative of actual value. Tax policy based on overt fiction is bad policy.
Even in the case of real estate, a large amount of value is locked up in extremely non-liquid markets. You might get a vaguely representative market-clearing transaction once per decade, with high price volatility that makes it nearly impossible to predict what the next market clearing transaction will look like. I’ve owned assets in these types of non-liquid markets; differences in subjective valuations can vary by an order of magnitude and there is no evidence from the market to support any of those values.
If you only include extremely liquid markets for tax purposes in order to make valuations vaguely plausible, assets will be made non-liquid such that they are excluded from consideration. Ultimately this is why taxes on unrealized gains have been a challenging proposition in practice. We have no way to accurately model realizable value for the majority of assets and current simple approaches produce extremely wrong estimates a substantial percentage of the time.
They’ll make up a number and make you spend money proving otherwise. The government won’t care about your inconvenience when they need the money.
Of course this is a prediction of something that hasn’t happened before but looking at the chess prices move this does appear to be an intended destination.
That isn’t the asset valuation, that is the range of assessments interested parties make with respect to asset value. Because market clearing transactions are rare in many asset markets, those extremely high variance estimates of asset value are all you have to work with. It is only marginally better than no information at all. Too make matters worse, the rare transactions in these markets frequently have a lot of complicated structure such that the nominal price is not reflective of the underlying value.
tl;dr: Many assets have no meaningfully assessable fair market value. These are investments with extremely long and indefinite time horizons before the asset value can be assessed in a reasonable way. You can look at it as a peculiar type of risk capital portfolio with an extraordinarily long time horizon.
Even in the case of real estate, a large amount of value is locked up in extremely non-liquid markets. You might get a vaguely representative market-clearing transaction once per decade, with high price volatility that makes it nearly impossible to predict what the next market clearing transaction will look like. I’ve owned assets in these types of non-liquid markets; differences in subjective valuations can vary by an order of magnitude and there is no evidence from the market to support any of those values.
If you only include extremely liquid markets for tax purposes in order to make valuations vaguely plausible, assets will be made non-liquid such that they are excluded from consideration. Ultimately this is why taxes on unrealized gains have been a challenging proposition in practice. We have no way to accurately model realizable value for the majority of assets and current simple approaches produce extremely wrong estimates a substantial percentage of the time.