exchanges grew from 1,257 to 4,394; however the exchanges' share of all verified CoStar

transactions remained in the 18-20 percent range. Notably, the year of 2003, which is the

year in which the maximum statutory capital gain rate was decreased from 20 percent to

15 percent, was not associated with a decrease in the number of exchanges. In fact, the

number of exchanges increased from 4,228 in the previous year to 4,464. A decrease in

the maximum capital gain rate as the simulation analysis suggests can possibly make an

exchange a less attractive alternative if the tax deferral is the main motivation to

participate in such a transaction.

 Inspection of Table 3 reveals that exchanges are more frequently used in apartment

markets. Of the 37,547 verified apartment transactions in the sample, 11,209

(approximately 30 percent) involved the use of an exchange. Moreover, this percentage

has remained remarkably stable during 1999 2005. Among other property types,

exchanges generally account for 10-18 percent of all transactions.

 Tables 4 through 6 present breakdowns of property sales for all 46 markets covered

by CoStar for apartment, office and retail properties, respectively. Markets are sorted

alphabetically to make it easier for the reader to locate his or her market of interest. The

number of transactions for each market and the percentage of total transactions by

property type are presented. The tables show that there is a substantial variability in terms

of transactions observed in different markets.

Apartments

 Table 4 reveals that the largest apartment market is Los Angeles with 25 percent of

all sales. New York City is the second largest market with 12 percent of all transactions.

The smallest market (Charlotte) contains only 12 usable sales observations. The table

reveals that relatively few markets account for a major share of all apartment sales. For