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Tax-Timing Option

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Tax-timing option
The option to sell an asset and claim a loss for tax purposes or not sell the asset and defer the capital gains tax.

Tax-Timing Option
An option every investor has to either sell an asset for a loss and thereby reduce one's tax liability or continue to hold it and maintain the possibility that one may eventually sell it for a gain.


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The tax-timing option for any security is implicit as investors benefit from the flexibility of recognizing losses and deferring gains.
Taxes When firms choose long-term financing, then the tax-timing option that occurs depends on the term structure of interest rates and the firm's tax rate.
This tax-timing option is valuable to an issuing firm that is in a low tax bracket when it raises capital but may face higher tax rates in the future.
 
 
 
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