1031 tax exchange at risk - RISE UP- BP nation and be heard !

8 Replies

So there has been rumblings of the current administration trying to find additional tax savings anywhere they can.

A crazy notion has been to look at doing away with the 1031 exchange. This goes against every founding principal this country has.

We need to be profound and stand up and let our legislative bodies of government know that we will not stand for this kind of proposition whatsoever!

There is a site where it auto generates forms to send and has information and how we can fight this atrocity that would hurt investment all across the United States.

If they hear our voice as one loud and clear they will back off.............. : )

FIGHT to keep 1031 Exchange

   

Done!

Scary - thanks for sharing @Joel Owens  . I also submitted to my senators and representative - hopefully everyone else will too!!

Joel,

Don't you have some retail centers to sell?  I have time to kill in that I am waiting on due diligence docs today.

Done.

Mark

Originally posted by @Joel Owens:

So there has been rumblings of the current administration trying to find additional tax savings anywhere they can.

A crazy notion has been to look at doing away with the 1031 exchange. This goes against every founding principal this country has.

We need to be profound and stand up and let our legislative bodies of government know that we will not stand for this kind of proposition whatsoever!

There is a site where it auto generates forms to send and has information and how we can fight this atrocity that would hurt investment all across the United States.

If they hear our voice as one loud and clear they will back off.............. : )

FIGHT to keep 1031 Exchange

   

Congress passes laws on taxation and the President either signs them or vetoes.  The administration cannot just go looking for money.

I think the 1031 and mortgage interest deduction will eventually be gone.  Most other countries do not have these tax preferences and like it or not, they probably won't survive here forever either.  I know not want people want to hear.

I have benefited from the mortgage interest deduction on my primary, but I do see the economist's point of view on its inefficiency in that it encourages debt, which we don't want to do.

Same for the 1031, as I'd be a big beneficiary in the future if I want to roll my gains on my apartments into bigger commercial property.  I can see why others are going after it as the average person will never benefit from a 1031 so I could see both parties signing off on eliminating it for some bigger priorities.

In the near term, a giant tax deal like this is probably off the table.  Congress can barely approve bills for naming post offices at this point and it is hard to imagine this suddenly changing in the near term.

Same for the 1031, as I'd be a big beneficiary in the future if I want to roll my gains on my apartments into bigger commercial property.  I can see why others are going after it as the average person will never benefit from a 1031 so I could see both parties signing off on eliminating it for some bigger priorities.

Actually, people often make this mistake and assume that the 1031 Exchange is just a tax-deferred transaction for the sale of investment real estate.  It is actually more of an economic stimulus plan to keep people fully invested and to stimulate transaction volume and activity. 

We routinely poll our clients, and what we have found over the years, is that most real estate investors that 1031 Exchange do so in order to put themselves into a better position without paying any taxes.  They also tell us that if they had to pay the taxes they would not have done the transaction (i.e. sold and reinvested in another property), but would have held on to the existing property.  So, if the 1031 Exchange were to be taken away, we have found that 60% to 80% of the investors who have 1031 Exchanged with us would not sell at all.  This means that 60% to 80% of the investment property transactions would disappear, and the corresponding/related real estate commissions, title insurance premiums, escrow fees, lender's fees and interest, appraisal fees, etc., would also go away and they would not pay any taxes on their earnings.  So, eliminating the 1031 Exchange actually turns out to be a income tax revenue loser rather than raiser. 

This threat to 1031 Exchanges comes up every three to five years, and as people weigh in, like those above, and as we explain to members of Congress how it would negatively impact the real estate industry, they always back off.  So, it is important that you let your representatives know how you feel about this so that they will back off again like they always do. 

Originally posted by @Bill Exeter:

Same for the 1031, as I'd be a big beneficiary in the future if I want to roll my gains on my apartments into bigger commercial property.  I can see why others are going after it as the average person will never benefit from a 1031 so I could see both parties signing off on eliminating it for some bigger priorities.

Actually, people often make this mistake and assume that the 1031 Exchange is just a tax-deferred transaction for the sale of investment real estate.  It is actually more of an economic stimulus plan to keep people fully invested and to stimulate transaction volume and activity. 

We routinely poll our clients, and what we have found over the years, is that most real estate investors that 1031 Exchange do so in order to put themselves into a better position without paying any taxes.  They also tell us that if they had to pay the taxes they would not have done the transaction (i.e. sold and reinvested in another property), but would have held on to the existing property.  So, if the 1031 Exchange were to be taken away, we have found that 60% to 80% of the investors who have 1031 Exchanged with us would not sell at all.  This means that 60% to 80% of the investment property transactions would disappear, and the corresponding/related real estate commissions, title insurance premiums, escrow fees, lender's fees and interest, appraisal fees, etc., would also go away and they would not pay any taxes on their earnings.  So, eliminating the 1031 Exchange actually turns out to be a income tax revenue loser rather than raiser. 

This threat to 1031 Exchanges comes up every three to five years, and as people weigh in, like those above, and as we explain to members of Congress how it would negatively impact the real estate industry, they always back off.  So, it is important that you let your representatives know how you feel about this so that they will back off again like they always do. 

The same could be said for any transaction.  Why not apply to stock transactions or eliminate cap gains tax on everything instead of just real estate?  Stock exchanges would see higher trade volumes, more commissions for brokerage houses and thus tax revenue, etc...  Just playing Devil's Advocate.  Real estate has tax preferences that other industries don't have.  People in those other industries aren't as excited about these preferences as people on this board are - just a fact. Therefore, there is risk that these won't be around forever.  Real estate lost quite a few tax preferences in the big 1980's tax reform.  It may be a target again.

if another big tax reform actually did come out of Congress, there would be a push to simplify the code, eliminate deductions, and reduce rates similar to the 86 reform.  Actually a lot of people on both sides of the aisle agree on these basic principles.  A plan might be to reduce the cap gains rate to 12%, but eliminate things like 1031 exchanges.  On personal income taxes, there might be an agreement to go to more of a flat tax and reduce the income rates a few points, but eliminate the mortgage interest deduction.

Of course, politicians always talk about a simpler, flatter tax code, but then when it comes to implementing specifics, back down.  Our current Congress would be incapable of a big reform like this, but it has been a generation since the last one so we are about due.

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