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Capital Gains Taxes and the Realization of Capital Gains and Losses - Evidence from German Income Tax Data

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  • Martin Jacob
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    Abstract

    This paper analyzes the influence of capital gains taxation on the decision to realize capital gains and losses when gains are tax-exempt after a certain holding period. Theory predicts that high marginal tax rates incentivize investors to realize taxable losses. In contrast, the propensity to realize taxable short-term capital gains decreases in the marginal tax rate. Using two stratified 10% random samples of all German income tax declarations filed in 2001 and 2004, the paper provides robust evidence for this prediction. The marginal tax rate has a significant and positive (negative) effect on the investor's propensity to realize capital losses (gains).

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    Bibliographic Info

    Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

    Volume (Year): 69 (2013)
    Issue (Month): 1 (March)
    Pages: 30-56

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    Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201303)69:1_30:cgtatr_2.0.tx_2-7

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    Related research

    Keywords: capital gains taxation; capital losses; capital gains; income tax; lock-in effect;

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