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Tax Deferral Option
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Tax deferral option
Allowing the capital gains tax on an asset to be payable only when the gain is realized by selling the asset.

Tax Deferral Option
The right of a taxpayer to refrain from paying capital gains tax on the price appreciation of an asset until he/she has locked in that appreciation by selling the asset. Suppose one bought a stock at $5 and its price is currently $15. Theoretically, the person owes capital gains tax on the extra $10, but the tax deferral option means that he/she will not have to pay until he/she sells the stock.


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These transactions can offer not only tax deferral options, but the ability to structure different tax treatments for different ownership entities, a continuing investment of pre- tax proceeds, increased levels of liquidity, varying degrees of continuing control, asset diversification, public market execution, and the ability for partners to make independent investment decisions.
 
 
 
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