The asset price incidence of capital gains taxes: evidence from the Taxpayer Relief Act of 1997 and publicly-traded real estate firms |
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| Institution: | 1. The Wharton School, 308 Lauder-Fischer Hall, University of Pennsylvania, 256 South 37th Street, Philadelphia, PA 19104-6330, USA;2. NBER, 1050 Massachusetts Ave., Cambridge, MA 02138, USA;1. Department of Industrial Engineering, Faculty of Engineering, Khorramabad Branch, Islamic Azad University, Khorramabad, Iran;2. Young Researchers and Elite Club, Karaj Branch, Islamic Azad University, Karaj, Iran;3. Department of Industrial Management, Faculty of Management and Accounting, Karaj Branch, Islamic Azad University, P.O. Box: 31485-313, Karaj, Iran;1. Servicio de Cirugía General, Hospital Francesc de Borja, Gandía, Valencia, España;2. Servicio de Anatomía Patológica, Hospital Francesc de Borja, Gandía, Valencia, España;1. Laboratory for Machine Tools and Production Engineering WZL of RWTH Aachen University, Steinbachstr. 19, 52074 Aachen, Germany |
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| Abstract: | We provide new evidence on the asset price incidence of corporate-level investment subsidies by examining the relative stock price performance of publicly traded companies in the real estate industry that should have been differentially affected by the capital gains tax rate reduction enacted in the Taxpayer Relief Act of 1997. By comparing real estate firms that have an organizational structure that allows entities who sell property to it to defer capital gains taxes and that plan to use the structure to acquire property with those that do not, we isolate the effect of the tax cut from industry trends and firm-level heterogeneity. When we examine the time period surrounding the reduction in the capital gains tax rate, our results suggest the tax change was substantially capitalized into lower share prices for these firms and the benefit of the seller’s capital gains tax deferral accrued mainly to the buyer of an appreciated property. |
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