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Originally Posted by Ecclesiastes
Gain is NOT the difference between the value of what is received and the value of what is transferred away. It is the difference between the value of what is received and the BASIS of what is transferred away, and "basis" is what you paid for it and not what it's worth.
For example, if I buy stock of the XYZ corporation at $100 per share, and then later sell the same stock for $120 per share on a day when the stock is trading on an open exchange at $120 per share, I have received $120 for stock with a value of $120 (which is an exchange of equal values) AND I have a gain of $20 because I originally paid only $100 for the stock and the $20 represents the increase in value that I have realized.
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It's not the increase in strict value i.e. purchase value vs sales value. That sale was a conversion of one issuance of stock say General Electric for another issuance such as federal reserve notes. You converted a currency and had a gain relative the FRN's. The stock had a certain dollar value in FRN's at purchase and had a higher value in FRN's at sale. That gain relative to the federal reserve must get taxed back to balance your books in relation with FRN's. Conversion of assets is where the tax lies. Conversion of assets is evidence of commerce. Commercial law dictates the books be balanced between merchants.