Understanding the Real Estate Provisions of Tax Reform: Motivation and Impact

25 Pages Posted: 19 Jul 2004 Last revised: 17 Sep 2008

See all articles by James R. Follain

James R. Follain

Federal Home Loan Mortgage Corporation (FHLMC); National Bureau of Economic Research (NBER)

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

David C. Ling

University of Florida - Warrington College of Business Administration

Date Written: June 1987

Abstract

Capital investment tax provisions have been changed numerous times in the last decade, with depreciation tax lives shortened in 1981 and lengthened ever since and capital gains taxation reduced in 1978 and 1981 and now increased. The first part of this paper analyzes these changes and attributes a large part of them, including the 1986 Tax Act, to changes in inflation: tax depreciation schedules and capital gains taxation that look reasonable when the tax depreciation base is being eroded at ten percent a year and an overwhelming share of capital gains is pure inflation take on a different appearance when inflation is only four percent. The remainder of the paper critiques the typical project model used to compute impacts of tax changes on real estate and report simulation results using a modified model.

Suggested Citation

Follain, James R. and Hendershott, Patric H. and Ling, David Curtis, Understanding the Real Estate Provisions of Tax Reform: Motivation and Impact (June 1987). NBER Working Paper No. w2289, Available at SSRN: https://ssrn.com/abstract=347059

James R. Follain (Contact Author)

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Patric H. Hendershott

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David Curtis Ling

University of Florida - Warrington College of Business Administration ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
352-392-9307 (Phone)
352-392-0301 (Fax)

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