Avoiding Taxes at Any Cost : The Economics of Tax-Deferred Real Estate Exchanges
This study examines the role tax-deferred exchanges play in the determination of reservation and transaction prices in U.S. commercial real estate markets. Taxpayers face significant time constraints when seeking to complete a delayed tax-deferred exchange. In a perfectly competitive market, a weakened bargaining position would not affect the transaction price. However, in illiquid, highly segmented commercial real estate markets, the exchanger may be required to pay a premium for the acquired property relative to its fair market value. Using a unique and rich dataset of commercial property transactions, we find that tax-motivated exchange buyers pay significantly more, on average, than non-exchange investors for their apartment and office properties, all else equal. Moreover, these average price premiums generally exceed the tax deferral benefits investors obtain by the use of a tax-deferred exchange.This result is robust to a number of alternative specifications. Thus, for many investors the pursuit of tax avoidance comes at a steep price
Year of publication: |
[2008]
|
---|---|
Authors: | Petrova, Milena T. |
Other Persons: | Ling, David C. (contributor) |
Publisher: |
[2008]: [S.l.] : SSRN |
Description of contents: | Abstract [papers.ssrn.com] |
Saved in:
Saved in favorites
Similar items by person
-
Ling, David C., (2011)
-
Avoiding taxes at any cost : the economics of tax-deferred real estate exchanges
Ling, David C., (2008)
-
Search costs, behavioral biases, and information intermediary effects
Ling, David C., (2018)
- More ...