IPX1031 Insight Blog

Section 1031 Exchanges are Important to a Healthy Economy

by rliland, Contributor James Miller, Assistant General Counsel, IPX1031®

Over the past two years there have been numerous proposals to restrict or eliminate I.R.C. §1031 tax deferred exchanges. These proposals are based on misunderstandings about §1031 and do not account for the powerful stimulus impact that §1031 exchanges have on the US economy. This article will debunk a few of those myths and discuss the findings of a couple of recently released studies that quantify just how important §1031 exchanges are to a healthy US economy.

Myth: Section 1031 allows taxpayers to avoid capital gains taxes, and to defer gain indefinitely.

Truth: Under §1031, taxes are deferred—not eliminated. Section 1031 exchanges structured under the IRS regulatory safe harbors are neither tax savings vehicles nor “abusive tax avoidance schemes.” Payment of tax occurs: 1) upon sale of the replacement asset and 2) incrementally, through increased income tax due to reduced depreciation deductions. A recently conducted study entitled “The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate” conducted by Professors David Ling and Milena Petrova (“Ling & Petrova Study”) examined more than 1.6 million commercial real estate transactions between 1997 and 2014. It found that nearly eighty-eight percent of properties acquired in a 1031 exchange were ultimately sold in a taxable sale, rather than a subsequent exchange.

 

Myth: The absence of a precise definition of “like-kind” is administratively difficult for the IRS and creates the opportunity for abuse.

Read the full article here.

Locate a 1031 Expert In Your Area

Recent Posts

Tax Straddling – 1031 Exchanges at the End of the Year

updated November 2023 Tax Straddling - Pay Taxes in 2024 or 2025? When a 1031 Exchange is opened in the latter part of the year, a seasonal treat worth mentioning is “tax-straddling.” If that exchange is successfully completed, those taxpayers defer taxes to receive...

1031 Cybercrime

Nationwide, fraud and cybercrime continue to escalate. In our recent research, Americans shared that 1 in 3 have been victims of identity theft and 55% have been victims of scams. Unfortunately, incidents are trending upward, which is impacting commercial real estate...

Graham Beene Expands IPX1031 Arkansas, E Texas & N Louisiana

IPX1031 Arkansas, East Texas and Northern Louisiana Amps Up 1031 Coverage with Graham Beene ​  IPX1031 Promotes Graham Beene into 1031 Exchange Sales DALLAS, TX (October 12, 2023) - Investment Property Exchange Services, Inc. (IPX1031) is pleased to announce the...

Pin It on Pinterest