2.48 percent of P,2. This implies the taxpayer could afford to pay up to a 2.48 percent

premium for the replacement property, assuming they did not agree to a price discount on

the sale of the relinquished property.

 As HOLD1 increases to 10, the maximum price impact rises from 2.48 percent to

4.03 percent. Assuming HOLD1 = 20, the maximum price impact increases further to

5.33 percent. In short, the relative attractiveness of the exchange strategy is

unambiguously positively related to the magnitude of the accumulated gain, all else

equal.

 The relation between INCNPVt and 7c1, however, for a given HOLD1 is less clear.

For example, assuming HOLD1 = 5, increased price appreciation produces slight

increases in INCNPVt. However, with HOLD1 = 20, higher values of 7 produce lower

values of INCNPVt. With HOLD1 = 10, the relation between x7t and INCNPVt is sensitive

to the assumed value of HOLD2.

 All else equal, the value of tax deferral increases with its duration. However, the

top panel of Table 1 indicates that INCNPV, increases with HOLD2, but at a decreasing

rate. For expected holding periods longer than eight to ten years, INCNPVt is largely

unaffected by increases in HOLD2 and, in fact, for holding periods in excess of 16 years

the value of INCNPVt begins to decrease.

 The premium price effect in Panel A ranges from 1.85 percent to 9.00 percent of

value. These results clearly indicate that any price discounts or premiums observed in the

data are likely to vary depending on the magnitude of the taxpayer's accumulated gain on

the relinquished property. However, the size of the taxpayer's accumulated taxable gain

is not observable in the data set. The maximum price premiums displayed in Panel B of