Tax deferral option
Tax deferral option
Allowing the capital gains tax on an asset to be payable only when the gain is realized by selling the asset.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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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