%0 Journal Article %A Nathan Sosner %A Stanley Krasner %A Ted Pyne %T The Tax Benefits of Relaxing the Long-Only Constraint: Do They Come from Character or Deferral? %D 2019 %R 10.3905/jwm.2019.1.068 %J The Journal of Wealth Management %P jwm.2019.1.068 %X In this study, we propose a decomposition of the total tax benefit (or liability) of a strategy into what we define as character and deferral components. Our decomposition is mathematically straightforward and intuitive, and it allows for a quick and informative assessment of tax benefits of different tax-aware strategies without modeling various investor-specific situations. We use this character-deferral decomposition to identify the source of tax benefits resulting from relaxation of the long-only constraint. Our empirical evidence shows that, for tax-aware strategies, relaxing the long-only constraint results in a drastic increase in their tax benefits, in particular owing to an increase in the character benefit. We conclude that tax-aware relaxed-constraint strategies are more attractive to taxable investors than their long-only counterparts. %U https://jwm.pm-research.com/content/iijwealthmgmt/early/2019/01/08/jwm.2019.1.068.full.pdf