Having more than a superficial understanding of the economics and mechanics of capital gains on residential property is paradoxically a social and economic task. For example, despite typically being lumped together as taxable gains by the financial media and general public, short-term capital gains and long-term capital gains are taxed differently. This differential treatment, by taxing the higher proportion of greater gains at higher tax rates (and vice versa), potentially influences how investors trade and invest-in other words, how price behaves-because they are subject to different penalties and different timescales (typically how long an investor must own an asset to qualify for the lower, long-term rate; or ‘minimum holding period’). The tax treatment of capital gains is also geared towards redistributing wealth, which is why we have progressively higher tax rates on larger gains (or what’s called progressive tax brackets in the US). The paper touches on other tax-related issues such as tax credits to incentivize affordable housing. Then comes property ownership and rental income, and what happens to it legally, a veritable maze of mind-numbing precedent. Among other things, this includes how the economics of capital gains can be creatively and effectively managed, from the timing of sales and tax loss
