Speak up to save the 1031 tax-deferred exchange!

[Bruceski44]

For those invested in real-estate who want to weigh in on plans to change the IRS Chapter 1031 Like-Kind Exchange [mod edit]

 

[OldShooter]

Eliminating it sounds like a good idea to me, though I have used it a couple of times.

The tax code needs to be simplified and tax revenues need to be drastically increased. This would be a small step.

 

[Starsky]

I'd much rather see them go after deferred compensation. The 1031 is good for growth.

Thanks for the link.

 

[Letj]

Eliminating it sounds like a good idea to me, though I have used it a couple of times.

The tax code needs to be simplified and tax revenues need to be drastically increased. This would be a small step.

I have much to lose because I am a prolific real estate investor. However, I couldn’t have said it better. I agree with you 100%. It the price one pays for living in a civilized society. We need to increase taxes to pay for needed services, the same way we pay for roads, a prison system and police. Everybody won’t like it, especially those who benefit for the the structure in place.

 

[Letj]

I'd much rather see them go after deferred compensation. The 1031 is good for growth.

Thanks for the link.

That too and while they’re at it, reform the inheritance laws.

 

[pb4uski]

Eliminating it sounds like a good idea to me, though I have used it a couple of times.

The tax code needs to be simplified and tax revenues need to be drastically increased. This would be a small step.

+1. Eliminate it and simplify things. They don't allow me to swap a stock or bond position in a taxable account without creating a taxable event so I don't see why realty should get a special advantage.

 

[Starsky]

+1. Eliminate it and simplify things. They don't allow me to swap a stock or bond position in a taxable account without creating a taxable event so I don't see why realty should get a special advantage.

I do it in my IRA all the time.

A 1031 just ensures that I re-invest 100% of the proceeds and the government will collect the deferred taxes on a larger investment later. Sounds pretty similar. Everyone is deferring their profit until later. There are strict limits on 1031s to achieve a policy goal of making it easier to reinvest in like-for-like investment property. They make 1031s practical only for certain types of transactions by certain experienced investors.

Remember that the seller that sells to the 1031 pays taxes on the sale of their property. So a 1031 encourages business activity, especially when trading up to larger properties to expand one's business and create more income and more tax revenue. The Federal Government collects half of their portion of the taxes - invests half in the form of deferred taxes - and locals collect 100% of theirs. It's a win-win-win. It's nice for rental properties, and I would imagine essential for commercial/industrial real property.

For rentals, cutting 1031s will only serve to decrease the inventory of rental properties in an already tight market and make it harder to grow rental inventories over condo conversions, Airbnbs and owner[occupied]ship.

 

[OldShooter]

I suppose this thread will get shut down, but I will add a factual story without any political comment:

DW and I are in a deal where we have split an old resort with a friend who also owns a bunch of farmland. He has done a 1031 exchange, selling farmland and buying his piece of the resort. He is going to claim that he is operating it as a business, so 1031 rqmt. is satisfied and at least for a while, hobby business rules are satisfied. This land (and ours) is now part of a family compound that originated about 100 years ago. So these new purchases won't be sold in the foreseeable future, measured in generations. Ergo his gain on the farmland is basically buried forever since the resort land will get a basis step-up when he dies.

 

[MichaelB]

Sorry folks, advocacy and solicitations are not allowed per forum rules.