How Low Can You Go? New Capital Gains Tax Rates Pose Interesting Choices for Exchangers

By Goold, Linda | Journal of Property Management, January-February 2004 | Go to article overview

How Low Can You Go? New Capital Gains Tax Rates Pose Interesting Choices for Exchangers


Goold, Linda, Journal of Property Management


When President Bush sent his tax bill to Congress in early 2003, media and political scrutiny focused on the proposed elimination of taxation on dividends. That proposal was a bold and controversial stroke, but one completely consistent with economic theory about the taxation of capital. For more than 40 years, critics of the tax system have believed the Internal Revenue Code imposes burdensome taxes that impair capital formation.

What emerged from Congress substantially reduced taxes on capital but is different from what the President originally proposed. The bill Congress sent to him for signature restructures both capital gains and dividends taxation. For the first time, dividends are to be taxed separately from other income and at a very low rate. Also, new capital gains rates and dividends will be taxed at the same 15 percent rate. For the first time in memory, some investors may determine it is advantageous to sell property outright, recognize their gains and pay their tax, a major change from the popular transaction structure of deferred like-kind exchanges.

The like-kind exchange provisions are unchanged. The 45-day and 180-day requirements still apply, and the investor continues to have a carryover basis in the replacement property acquired in the exchange. The newly reduced capital gains rate may make outright sales more advantageous to some. A simplified example illustrates the new decision-making process.

Investor A owns Building One, with a basis of $2 million. A sells Building One for $5 million, realizing a gain of $3 million, then acquires Building Two for $7 million. If A has satisfied all riming and other requirements, this transaction could be treated as a deferred exchange and A would defer taxes on the $3 million gain. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

How Low Can You Go? New Capital Gains Tax Rates Pose Interesting Choices for Exchangers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.