Its the incentives, stupid:
What does this imply about the value of a marriage contract?
Divorce filings shot up here and in other big cities across China this past week after rumors spread that one way to avoid the new 20 percent tax on profits from housing sales was to separate from a spouse, at least on paper.
What does this imply about the value of a marriage contract?
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ReplyDeleteThe imposed 20% capital gains taxes are those couples that own 2 or more houses.
ReplyDeleteA marriage contact penalizes post-investment hold-up (i.e., divorce) and this makes the couples willing to invest more in the marriage. (Managerial Economics, Froeb). Not in this situation!
Divorce in China is just a tactic to saves families hundreds of thousands of dollars. So couples with two properties that divorce can put each house into one person’s name to then sell them tax-free under certain conditions, after which they could remarry. So the divorce is merely something on paper rather than a real spilt.
The question of what does this imply about the value of a marriage contract – FINANCES RULE! The contract is important but from a financial aspect not very.
Suzette Monteverde, Empire State College, Dr. Singh, ECO 65155X