Embedded tax liabilities and portfolio choice

Basu, Anup K., Turvey, Phillip, & Verhoeven, Peter (2013) Embedded tax liabilities and portfolio choice. Journal of Portfolio Management, 39(3), pp. 93-104.

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his study presents an improved method of dealing with embedded tax liabilities in portfolio choice. We argue that using a risk-free discount rate is appropriate for calculating the present value of future tax liabilities. Supportive of recent research, our results found a taxation-induced preference of holding equities over bonds, and a location preference of holding equities in the taxable account and bonds in retirement accounts. These important findings contrast with traditional investment advice which suggests a greater capacity for risk in retirement accounts.

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ID Code: 57576
Item Type: Journal Article
Refereed: Yes
DOI: 10.3905/jpm.2013.39.3.093
ISSN: 0095-4918
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2012 Euromoney Institutional Investor PLC
Deposited On: 24 Feb 2013 22:59
Last Modified: 14 Aug 2014 23:47

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