Abstract: This article uses simple numerical examples to study the relationship between interest rates and the familiar problem of "lock-in" that arises from deferred taxation of unrealized appreciation. In the cases we study, lock-in comes about because of positive taxpayer borrowing costs, and realization and deferral remain significant problems for income taxation even in periods of low government borrowing rates. We also find that it is the relative size, rather than the absolute size, of the borrowing costs that matters. Specifically, lock-in prevents a taxpayer from selling an asset and buying another with a higher pre-tax return only when the incremental after-tax return increase is greater than the borrowing cost necessary to pay the tax triggered as a result of the sale. Thus the magnitude of the lock-in problem does not necessarily diminish as borrowing costs fall, but rather it depends upon a complex relationship between and among the falling interest rates, the incremental increased returns that are available, and the amount of unrealized appreciation in assets.