Accrued Gains are not Income: An Administratively Simple Rollover Treatment for Capital Gains Taxation

  •  Raymond L. Richman    
  •  Jesse T. Richman    
  •  Howard B. Richman    


This paper presents a definition of income that rejects both the BEA and Haig-Simons definitions concerning capital gains. Specifically, capital gains represent future income unless brought to the present by consumption of the gain. We demonstrate that the rollover treatment implied by this definition ends double-taxation, under-taxation, lock-in of capital, excessive incentives to consume capital, and other economic distortions. Finally, we detail an administratively-simple deferred gain account rule for the rollover treatment which would require that taxpayers only track one additional item of information – the total deferred gain that would be rolled over into the next tax year.

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