Real Estate Papers

Document Type

Journal Article

Date of this Version

7-2004

Publication Source

Journal of Public Economics

Volume

88

Issue

7-8

Start Page

1543

Last Page

1565

DOI

10.1016/S0047-2727(03)00036-7

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.

Copyright/Permission Statement

© 2004. This manuscript version is made available under the CC-BY-NC-ND 4.0 license.

Keywords

tax incidence, tax capitalization, REITS

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Date Posted: 27 November 2017

This document has been peer reviewed.