Bill Gates is one of the wealthiest individuals in the United States, with a current net

worth estimated to be $121$ billion dollars. $($Hayes$,2022).$ The majority of his net worth was

derived from his ownership in Microsoft Corporation. He owns approximately $1\mathrm{.}3$ percent of its

shares currently valued at $20$ billion dollars. Since his departure from Microsoft management in

$2014,$ he has diversified his investments to include other investments in other companies, real

estate holdings and collectables, among other things. $($Hayes$,2022).$

Much of Bill Gates$$ stockholdings are held in Cascade Investments, LLC$,$ a wholly owned

investment company. Its estimated current value is $35$ billion dollars. $($Hayes$,2022).$

He also has significant real estate holdings, including his Xanadu home in the Seattle area

valued at $131$ million dollars, a Wellington Florida horse ranch valued at $8\mathrm{.}7$ million dollars, and

the Grand Bogue Caye Island near Belize, valued at $25$ million dollars. $($Hayes$,2022).$

Mr$.$ Gates has invested in collectables, too, such as a Leonardo Davinci manuscript called

Codex Leicester, valued at $31$ million dollars and several paintings, including Andrew Wyeth$$s

$$Distant Thunder$$ valued at $7$ million dollars and Frederick Childe Hassam$$s $$Room of

Flowers$$ worth $20$ million dollars. $($Hayes$,2022).$

Assume Mr$.$ Gates$$ portfolio of investments experiences the following results in $2023$:

$$ His tradeable Microsoft stock appreciates by $10$ percent from its $2022$ value of $20$ billion

dollars, based upon $2023-$year end New York Stock exchange values.

$$ The non$-$tradeable Davinci manuscript has not been revalued since $2022,$ when it carried

a $31-$million$-$dollar value. However, under the Greenbook$$s guidelines, page $35,$ it will be

revalued using the five$-$year Treasury interest rate plus two percent. The current five$-$year

Treasury rate is $3\mathrm{.}26,$ resulting in an appreciation rate of $5\mathrm{.}26$ percent.

$$ Mr$.$ Gates$2023$ regular tax liability is $$240,000,000($based on a $40\%$ tax rate given $600$

million dollars of regular taxable income$).$

$$ President Biden$$s $2023$ Budget proposal included a tax on unrealized appreciation of

assets for high net worth taxpayers. You will need to research and find a summary of this

proposal.

THE CASE DISCUSSION QUESTIONS

Address the following questions:

$1.$ What will the proposed tax on unrealized gains apply to$?$

$2.$ How is the proposed tax on unrealized gains calculated?

$3.$ Assuming Bill Gates$$ Microsoft stock increases by $10$ percent and his Davinci

manuscript increases by $5\mathrm{.}26$ percent in $2023,$ will he be liable for the unrealized

gain tax? If so$,$ how much?