How Taxes and Required Returns Drove Commercial Real Estate Valuations over the Past Four Decades

John Duca, Patric Hendershott and David Ling ()

National Tax Journal, 2017, vol. 70, issue 3, 549-584

Abstract: We document the evolution of U.S. tax law regarding commercial real estate (CRE) since 1975, noting changes in income and capital gains tax rates and tax depreciation methods. The most prominent changes were in the 1981 and 1986 Tax Acts, but numerous significant changes occurred in the last dozen years. We then compute both the present value of tax depreciation per dollar of acquisition price and an effective tax rate for CRE. We explain the quarterly variation in CRE capitalization rates using an error-correction framework and find that the long-run estimates are statistically significant in the way theory would suggest. Moreover, the required financial asset return and the tax depreciation variables temporally predict (“cause”) capitalization rates in the long run, but not vice versa.

Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.17310/ntj.2017.3.02 (text/html)
Access is restricted to subscribers and members of the National Tax Association.

Related works:
Working Paper: How Taxes and Required Returns Drove Commercial Real Estate Valuations over the Past Four Decades (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:70:y:2017:i:3:p:549-584

Access Statistics for this article

National Tax Journal is currently edited by Stacy Dickert-Conlin and William M. Gentry

More articles in National Tax Journal from National Tax Association, National Tax Journal Contact information at EDIRC.
Bibliographic data for series maintained by The University of Chicago Press ().