Taxes and the Futures-Forward Price Difference in the 91-Day T-Bill Market

This paper investigates a tax-based explanation for the futures-forward price divergence in the 91-day T-bill. The explanation is, firstly, in terms of the distinction between capital gains and losses and ordinary gains and losses, and secondly, in terms of investors to whom the above distinction applies and investors, such as broker/dealers, to whom it does not. The empirical results are encouraging though more ambiguous in the post-1981 period. Overall, it would seem that other factors, in addition to taxes, are also at work. (Printed by permission of the publisher.)