Capital Gains Taxation

Research Report

Capital Gains Taxation

From The Encyclopedia of Taxation and Tax Policy
October 1, 1999


Under a pure net accretion (Haig-Simons) approach to income taxes, real capital gains would be taxed each year as they accrued and real capital losses would be deducted. Capital gains are generally taxed only when "realized" by sale or exchange, however, because it would be difficult to estimate the value of many assets, ait would be viewed as unfair to tax income that had not been realized, and it could force the liquidation of assets to pay the tax on accruals. Taxation upon realization, however, leads to other problems, which require policy compromises. This article provides a current law and the history of capital gains taxation, as well as economic issues in capital gains taxation.

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