You buy two houses for 100 thousand dollars each. One appreciates in value to be worth a million, the other has a sewage plant open next to it and becomes worthless.
You are a millionaire because of the first house, but the government isn’t going to tax you on the change in value because you haven’t sold it yet. Let’s say you decide to sell yhe second house for a penny. You still have a net worth of a million, but your income for the year is -100k.
This happens many places, but the most visible is the stock market
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