Abstract

http://ssrn.com/abstract=503681
 
 

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Perception and Income: The Behavioral Economics of the Realization Doctrine


Terrence R. Chorvat


George Mason University School of Law


Connecticut Law Review, Vol. 36, p. 75-124, 2003

Abstract:     
The requirement that gains be "realized" before they are subject to income tax is one of the most fundamental doctrines in tax law as well as being one of the most controversial. The common assumption in the academic literature is that this requirement leads to significant inefficiencies and inequities. This article argues that requiring a realization event is generally the best way to measure taxable income because it is consistent with how individuals actually perceive income. This perspective helps us to understand the development of the realization doctrine as well as suggest ways in which the current tax system can be improved, such as exempting some of the amounts reinvested in mutual funds from income taxation.

Keywords: Tax, tax law & policy

JEL Classification: K34

Accepted Paper Series


Not Available For Download

Date posted: February 15, 2004  

Suggested Citation

Chorvat, Terrence R., Perception and Income: The Behavioral Economics of the Realization Doctrine. Connecticut Law Review, Vol. 36, p. 75-124, 2003. Available at SSRN: http://ssrn.com/abstract=503681

Contact Information

Terrence R. Chorvat (Contact Author)
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8208 (Phone)
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