Question

In terms of tax purpose(s), Why do you think that how long one owned an asset matters? Should such be in your opinion? Why or why not?

Answer 1

Any asset, be it short term or long term, is assumed to generate some financial value (if no loss) to the owner. Considering that the asset is a short term or a long term asset, the inflation needs to be adjusted for tax purposes. We all know that inflation adjustments are huge in case of assets owned for 10-15 years and above.

I agree that such a proposition is valid because:

As pointed out earlier also, long term ownership of assets and gains made thereby have to be adjusted with inflation, whereas in case of short term ownership the gains become a part of a person's regular income. The very concept of ownership period of assets shows the intent of owner to either make income gains or to bear the long term economic, market and geo-political risks. So, a person who bears the risk and faces market forces against the assets during the period of ownership gets rewarded indirectly.

Also, in case an asset which is owned for a longer duration and it generates an income (eg rent) , the income is treated fairly for the tax purposes. But the benefit is only on the ownership of the assets.