Tax Induced Divestments and Mobility - Insights from a Kink in Capital Gains Tax Rates

17 Pages Posted: 23 Jun 2020 Last revised: 27 Jul 2022

See all articles by Walter D'Lima

Walter D'Lima

Florida International University (FIU) - Hollo School of Real Estate

Date Written: May 29, 2020

Abstract

The dearth of evidence on the effect of capital gains taxation on real estate transactions is partly due to the difficulty in identifying affected sellers and transactions. This study explores this question by comparing investors, that have greater timing ability in the real estate market, with owner- occupants. Assets that are held for at least a year are taxed at a lower capital gains tax rate in the U.S. Property sales by homeowners that satisfy certain conditions and are held for at least two years are exempt from capital gains taxation. I exploit a discontinuity in capital gains tax rates around the one-year and two-year holding period marks and present evidence on differential tax related effects on divestment and mobility in the residential real estate market.

Keywords: capital gains tax, discontinuity, holding period, mobility

JEL Classification: G11, R2

Suggested Citation

D'Lima, Walter, Tax Induced Divestments and Mobility - Insights from a Kink in Capital Gains Tax Rates (May 29, 2020). Available at SSRN: https://ssrn.com/abstract=3614042

Walter D'Lima (Contact Author)

Florida International University (FIU) - Hollo School of Real Estate ( email )

Miami, FL 33199
United States

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