Repeal 1031 Exchanges – Taxpayers Say NO!
A Tax Reform Bill is now more likely to come in 2017. Your real estate and investments are threatened by potential repeal of limitation of Section 1031 Tax Deferred Exchanges.
When investors or businesses structure their asset sale and replacement purchases as 1031 Tax-Deferred Exchanges, they are able to defer paying capital gains and recapture taxes. The 1031 Exchange is a powerful tool that encourages people and entities to re-invest their profits into newer, more productive property, stimulating business and economic growth. However, it is very possible that 1031 Exchanges could be repealed or limited if they are included in upcoming tax reform bills.
The House Republican Blueprint for Tax Reform, titled “A Better Way” is expected to be the model for tax reform in 2017. The proposal pairs 100% immediate expensing with unlimited loss carry forward for all tangible & depreciable personal property assets and real estate improvements, except land. The proposal would also eliminate the business interest expense deduction. While the proposal does not repeal Section 1031, neither does it expressly preserve the provision.
The last major tax reform was in 1986. At that time, Congress repealed the ability to take passive tax losses in real estate. An unintended consequence of this change was the ensuing real estate recession and the demise of the savings & loans industry. This eventually tipped the country into the recession of the early 90’s. Section 1031 is bigger than passive losses. In some U.S. markets, real estate brokers claim that 1031 Exchanges touch at least 45% of the real estate investment transactions.
In addition to real estate, 1031 Exchanges are heavily used on personal property such as cars, trucks, farm machinery, mining equipment and other heavy equipment, oil and gas equipment, airplanes, rail cars, locomotives, boats, art and collectibles, and every business asset trade-in. Eliminating the option of structuring transactions as 1031 Tax-Deferred Exchanges would not only cause a sharp drop in all of these transactions, but the additional business and services generated from the 1031 transactions would fall as well. Ernst & Young, LLP released a macro-economic study on the impact of repealing or limiting 1031 exchanges in 2015 that quantified that the US economy would actually contract if Section 1031 was repealed or limited, finding that GDP would be reduced by approximately $8.1 billion per year.
Our goal is to ensure that a repeal or restriction of Section 1031 is NOT included in any tax reform bill that is introduced.
Insiders believe that if a repeal or limitation on Section 1031 is included in a new bill, we will have a very difficult, uphill battle to preserve Section 1031. YOUR voice matters. Please take the time to contact Congress NOW.
Click here (www.ipx1031.com/action) to take action and let your legislators know how important Section 1031 is to you, your business and your clients.
It only takes 30 seconds for YOU to make a difference.
IPX1031® is the largest qualified intermediary in the country and has dedicated this website to tax reform.