IDEAS home Printed from
   My bibliography  Save this article

Untaxed and Taxed Entities in the Market for Commercial Real Estate


  • John F. McDonald

    () (Walter E. Heller College of Business Administration; Roosevelt University;)


This paper is a theoretical examination of untaxed and taxed entities that invest in real estate. The standard advice to real estate investors is to avoid using entities that are subject to taxation (such as C corporations in the U.S.) and employ entities that are not subject to taxation (such as limited liability companies, S corporations, and real estate investment trusts in the U.S.) in order to avoid double taxation of income. This paper shows that, in most situations, untaxed entities place a greater value of a given real estate property than does a taxed entity, which implies that taxed entities are at a distinct disadvantage at competing in the market for property. However, this conclusion is reversed if untaxed entities use a large amount of financial leverage compared to taxed entities and the borrowing rate for both is greater than the risk-free rate.

Suggested Citation

  • John F. McDonald, 2011. "Untaxed and Taxed Entities in the Market for Commercial Real Estate," International Real Estate Review, Asian Real Estate Society, vol. 14(2), pages 240-257.
  • Handle: RePEc:ire:issued:v:14:n:02:2011:p:240-257

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    More about this item


    Financial leverage; Asset valuation; Taxation;

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ire:issued:v:14:n:02:2011:p:240-257. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IRER Secretary Office/Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.