Preaching to the Choir
The recent focus on Donald Trump and his
finances has brought unappreciated attention to
§1031. There is the unfounded belief that §1031 is a
tool of the super-rich to get out of paying taxes.
Those of you receiving this newsletter have at some
point either expressed an interest in and/or have participated in a §1031 tax
deferred exchange. You understand the utility and value of this small
section of the tax code.
§1031 has been in the tax code for 95 years and for good reason. It is a
valuable incentive program to encourage investment in America. §1031
allows Taxpayers selling an investment property (pulling dollars out of the
American economy) to defer the payment of capital gain tax and
depreciation recapture if they put those dollars back into the American
economy by purchasing like kind replacement property. The tax bill doesn't
go away...it is simply deferred into the replacement property.
Studies completed in 2015 show that if §1031 were eliminated it would
cause contraction of the American economy. (See
11-18.pdf and http://www.1031taxreform.com/wp-content/uploads/Ling-
Estate.pdf.) If investors can only exit their investment property by paying
taxes on the gain, they won't sell. They'll sit tight. They will not be out
looking for new investment opportunities.
During my years in the business (24 and counting...) I have had the pleasure
of working with investors achieving important business and personal goals
● Landlords moving up from a single-family rental to a duplex.
● Business owners relocating from their start up location to a larger property
● Business owners relocating from their start-up location to a larger property
with better exposure.
● Farmers expanding their farm operation when the opportunity arises. And
so it goes.
Without exception, our clients are hard-working, regular Joes and Janes
looking for investment opportunity in America. They have put a lot of blood,
sweat, and tears into their properties and over time have seen those values
There have been and continue to be proposals to eliminate or curtail the
availability of §1031. If you are concerned about the future of this section of
the tax code visit www.1031taxreform.com to learn what you can do.
It is our sincerest hope that five years from now we will be hanging a
banner in the office celebrating the centennial of §1031.