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"Also, I beleive that it does no injustice to the basic rule, which is that losses should actually be incurred in reality before being recognized for tax purposes"

If I buy a stock at 100 and it falls to 50 I have incurred a 50% in reality whether I close the position or not. Professional traders and broker dealers mark to market all positions at the close of the year, so it is not accurate to say that the 'basic rule' is that a position must be closed before taking a loss. Also, it is grossly unfair that tax is due on a gain taken under the same circumstance as a loss that would require deferment.
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