RT Journal Article SR Electronic T1 The Tax Benefits of Relaxing the Long-Only Constraint: Do They Come from Character or Deferral? JF The Journal of Wealth Management FD Institutional Investor Journals SP jwm.2019.1.068 DO 10.3905/jwm.2019.1.068 A1 Nathan Sosner A1 Stanley Krasner A1 Ted Pyne YR 2019 UL https://pm-research.com/content/early/2019/01/08/jwm.2019.1.068.abstract AB 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.