Impose Capital Gain Tax on Like-Kind Exchanges
Calvin H. Johnson
University of Texas at Austin - School of Law
October 27, 2008
The Shelf Project
Tax Notes, Vol. 121, p. 475, October 27, 2008
The proposal would repeal nonrecognition of gain that current law allows for like-kind exchanges. Nonrecognition was first adopted to avoid the difficulties of valuation, but under modern broker transactions, valuation is not a difficult determination. Most gain not recognized in an exchange is never taxed. The reasons why Congress took stock and bonds out of eligibility for nonrecognition, moreover, apply to real estate as well. Real estate should not be favored over competing investments. Given revenue needs, taxing like-kind exchanges can help ease current budget difficulties.
The proposal is made as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue, defend the tax base, follow the money, and improve the rationality and efficiency of the tax system. The tax community can propose, follow, or edit proposals at http://www.taxshelf.org. A longer description of the Shelf Project can be found at ‘‘The Shelf Project: Revenue-Raising Projects That Defend the Tax Base,’’ Tax Notes, Dec. 10, 2007, p. 1077, Doc 2007-22632, 2007 TNT 238-37.
Shelf Project proposals follow the format of a congressional tax committee report in explaining current law, what is wrong with it, and how to fix it.
Copyright 2008 Calvin H. Johnson.
Number of Pages in PDF File: 6
Keywords: tax reform,like-kind exchanges
JEL Classification: H20Accepted Paper Series
Date posted: December 9, 2009
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