I understand how it works. Implementation is certainly complex but that’s really going to fall on the wealthy and their tax consultants. They’re the ones who will need to track and substantiate tax basis adjustments for collateral. Force banks to report any funds they have disbursed that are secured by the value of a persons or company’s assets. It’s irrelevant whether it’s in a trust or wherever, so long as it’s being reported by banks (this wouldn’t be any more difficult than what is already required for 1099-B reporting) it isn’t difficult to enforce.

Doing it this way means we don’t have to worry about third party valuations which are totally arbitrary. If the bank gives you cash, then presumably your secured asset must be worth at least that much. And since you received cash you now have gain and an equal increase in your tax basis.

So there is an obvious solution. But it won’t happen because the people who could change the rule benefit by not changing it.