The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates

This paper uses a direct-projections approach to estimate the effect of capital gains taxation on realizations at the state level and then develops a framework for determining revenue-maximizing rates at the federal level. We find that the elasticity of revenues with respect to the tax rate over a 10-year period is −0.5 to −0.3, indicating that capital gains tax cuts do not pay for themselves and that a 5 percentage point rate increase would yield $18 to $30 billion in annual federal tax revenue. Our long-run estimates yield revenue-maximizing capital gains tax rates of 38 to 47 percent. (JEL E62, H25, H71)

Foundations for the LPC

Foundations for the LPC covers the areas of the Legal Practice Course as set out in the LPC Outcomes: professional conduct and regulation, wills and administration of estates, and taxation. The volume also features content on human rights law. The volume uses worked examples and scenarios throughout to illustrate key points. To aid understanding and test comprehension of the core material, checkpoints and summaries feature in every chapter. The book covers topics such as professional conduct (including financial services and money laundering), revenue law (including income tax, capital gains tax, VAT, corporation tax, and inheritance tax), wills and administration of estates, and issues related to human rights.

11. Taxation of trusts and settlements

Settlements may be created by settlors in their lifetime, or by will, or they may arise under the intestacy rules. This chapter considers the tax implications of such settlements from the perspective of both the trustees and the beneficiaries. It considers each of the three main taxes separately: inheritance tax, capital gains tax, and income tax.

6. Capital gains tax

Capital gains tax (CGT) is charged on the gain (or increase in value) which is realised when a chargeable asset is disposed of. The statute which sets out all the rules relating to this is the Taxation of Chargeable Gains Tax Act 1992 (TCGA). This chapter discusses the principles of CGT; persons liable for CGT; disposal of assets; chargeable assets; calculation of CGT; the rate of CGT; capital losses; exemptions and reliefs; and CGT and the death of a taxpayer.

29. Sale of a business to a company

A sole trader or partnership may decide, for a variety of reasons, to incorporate the business. Incorporation will give rise to a number of tax and other problems. This chapter considers these problems and how they can be avoided, or at least mitigated. It shows that the tax rules are the most important consideration in this area, since if they are not appreciated, an unexpected tax bill can cause very serious cash flow problems. They include rules on income tax, capital gains tax, VAT, and stamp duty/stamp duty land tax.

4. Taking Instructions and Other Initial Matters

This chapter discusses initial activities in the conveyancing process including advising joint buyers on co-ownership; advising buyers to have a survey of the property carried out before exchange of contracts; estate agents; capital gains tax; stamp duty land tax; client care and advice on costs; professional conduct; the Law Society’s National Conveyancing Protocol; and advising on finance.

22. Capital gains tax and inheritance tax on business assets

This chapter examines the capital gains tax (CGT) and inheritance tax (IHT) regimes that apply to individuals in relation to businesses and business assets. Under the provisions of the Taxation of Chargeable Gains Act (TCGA) 1992, CGT is payable when a taxable person makes a disposal of chargeable assets giving rise to a chargeable gain unless an exemption or relief applies. The chapter first discusses the various rules which need to be considered to establish a taxpayer’s CGT liability on any given disposal. It then covers CGT in the business context; disposals of partnership property; disposals of shares; disposals of business assets owned by those involved in the business; the purchase by a company of its own shares; and inheritance tax.