This paper presents evidence on differential tax related incentives for divestments in residential real estate markets. Assets that are held for at least a year are taxed at a lower capital gains tax rate. The paper exploits a discontinuity in capital gains tax rates around the one year holding period mark for residential property. First, the empirical results show that individual investors, relative to homeowners that hold property for consumption purposes, disproportionately time sales to avail such benefits. Secondly, experienced investors are more likely to capitalize on the discontinuous tax benefit. Lastly, the paper highlights a trade-off between timing sales and capitalizing on the differential saving between short and long term capital gains tax rates and depicts that returns are lower for divestments that occur immediately after the one year mark.
The aim of this seminar series is to bring together people from academia and industry interested in the latest real estate research. In this series of bi-weekly presentations, we invite papers from scholars
who would like to present their ongoing work. Presentations will be 25 minutes long, followed by 25 minutes for the Q&A session. Junior researchers, students, and practitioners are very welcome to take part.