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On valuation before and after tax in no arbitrage models: Tax neutrality in the discrete time model

Author

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  • Jensen, Bjarne Astrup

    (Department of Finance, Copenhagen Business School)

Abstract

We establis necessary and sufficient conditions for a linear taxation system to be neutral - within the multi-period discrete time "no arbitrage" model - in the sense that valuation is invariant to the exact sequence of tax rates, realization dates as well as immune to timing options attempting to twist the time profile of taxable income through wash sale transactions.

Suggested Citation

  • Jensen, Bjarne Astrup, 2002. "On valuation before and after tax in no arbitrage models: Tax neutrality in the discrete time model," Working Papers 2002-1, Copenhagen Business School, Department of Finance.
    • Handle: RePEc:hhs:cbsfin:2002_001
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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7153
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    Cited by:

    1. Marc Rapp & Bernhard Schwetzler, "undated". "Asset Prices in the Presence of a Tax Authority," German Working Papers in Law and Economics 2006-1-1167, Berkeley Electronic Press.

    More about this item

    Keywords

    Tax neutrality; mark-to-market valuation; generalized linear taxation schemes; wash sales;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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