Money on the Table: Why the U.S. Should Tax Inbound Capital Gains

20 Pages Posted: 3 Jun 2011 Last revised: 23 Jun 2011

Date Written: June 3, 2011


In 1992, Chairman Rostenkowski introduced legislation that imposed US capital gains tax on foreign sellers of large blocks of shares (10 percent or more) in US corporations. The legislation was not a treaty override, although it added an anti-treaty shopping provision similar to those adopted for the branch profit tax in 1986. It also had anti-abuse provisions that addressed holding company structures. Today, the US faces a large budget deficit and seeks to impose higher burdens on its own multinationals. While that is also justified, there is no reason to let foreigners off the hook, especially since there is much more inbound FDI now than there was in 1992. Congress should adopt the Rostenkowski legislation now.

Keywords: taxation, capital gains, FDI

JEL Classification: H25

Suggested Citation

Avi-Yonah, Reuven S., Money on the Table: Why the U.S. Should Tax Inbound Capital Gains (June 3, 2011). U of Michigan Law & Econ, Empirical Legal Studies Center Paper No. 11-008, U of Michigan Public Law Working Paper No. 239, Available at SSRN: or

Reuven S. Avi-Yonah (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

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