Tax deferral option

Tax deferral option

Allowing the capital gains tax on an asset to be payable only when the gain is realized by selling the asset.

Tax Deferral Option

The right of a taxpayer to refrain from paying capital gains tax on the price appreciation of an asset until he/she has locked in that appreciation by selling the asset. Suppose one bought a stock at $5 and its price is currently $15. Theoretically, the person owes capital gains tax on the extra $10, but the tax deferral option means that he/she will not have to pay until he/she sells the stock.