Lucy Msall (Ph.D. (Economics) 2025, Chicago; Google Scholar), will join the Chicago faculty as an Assistant Professor of Law in 2026. Brian Leiter (Chicago):
She is the first graduate of our relatively new Master of Legal Studies program to be hired into a tenure-track job in a law school. Her primary areas of teaching and research interest include tax law and policy, law & economics, and empirical legal studies.
In the 2025-26 academic year, she will be a Post-Doctoral Fellow in Wealth and Income Inequality at the National Bureau of Economic Research.
Her job talk paper was Never-Realized Capital Gains (with Ole-Andreas Næss (Norwegian School of Economics; Google Scholar)):
Appreciated assets are subject to capital gains tax when sold by their original owner. Yet under policies of “stepped-up basis at inheritance,” many countries forgive this latent tax obligation if the asset is instead transferred, unsold, to the owner’s heir.
In the first part of this paper, we create novel data on capital gains in Norway and show that large fractions of top household wealth are in the form of capital gains with latent (i.e., unrealized) capital gains tax liability. Furthermore, much of this capital gain is never taxed: Norway’s stepped-up basis policy exempted around $300 million of capital gains in stock and real estate from taxation each year (an amount equal to 19-25% of yearly taxable gains in stock and real estate).
In the second part of the paper, we study investor responses to a reform that moved Norway from a system of stepped-up basis to a system in which heirs inherit their predecessor’s latent capital gains tax obligation when they inherit appreciated assets. Using a difference-in-difference empirical strategy exploiting cross-sectional variation in investors’ unrealized capital gain prior to the reform, we estimate that the removal of step-up precipitated large increases in taxable realizations among highly-appreciated investors. The removal of step-up also affected the composition of inheritance: inherited assets had a lower ratio of capital gain to value following the reform. Overall, we conclude that stepped-up basis has a large effect on investors’ decision to sell appreciated assets and disproportionately benefits the very wealthy.
Other recent works:
- Consumer-Financed Fiscal Stimulus: Evidence from Digital Coupons in China (2024) (with Jing Ding (Tongji University), Lei Jiang (Kent State; Google Scholar) & Matthew Notowidigdo (Chicago; Google Scholar))
- Sex, Drugs, and R&D: Missing Innovation from Regulating Female Enrollment in Clinical Trials (with Valerie Michelman (Delaware; Google Scholar))
- Do Corporate Insiders “Buy-Borrow-Die”? Searching for Individual Tax Avoidance in Public Company Filings
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