Stepped-up basis going away

[Mark H. Porter]

Good morning, regardless of what happens today, there’s a HUGE bill due from covid.

1031’s, capital gains, and now the stepped-up basis could go away.  Rather than people thinking I’m coercive, please just google “stepped up basis going away” and makes your own decisions.

[Bill Exeter]

Hi @Jay Hinrichs, 

Yes, I think you are absolutely right!  

One of the huge benefits to the economy is the 1031 Exchange.  It significantly increases liquidity in the real estate market, allows investors to reposition or repurpose their real estate portfolios (especially in light of events like COVID-19), diversify or consolidate their holdings, etc.  The net lease market is one example where a huge percentage of the buyers are those going through a 1031 Exchange.  

The 1031 Exchange is also a tax revenue raiser (contrary to what many politicians believe) because each 1031 Exchange creates at least two real estate commissions, two title insurance premiums, two escrow/closing attorney fees, two inspections, etc., all of whom pay income taxes on their revenue and fees.  Eliminating the 1031 Exchange would not only significantly reduce the transaction volume, but also tax revenue because all of these vendors would also lose revenue.  

Ernst & Young estimated that GDP would drop by .8% (a 42% drop) back in 2015 if 1031 Exchanges were eliminated.  

Presidential candidate Joe Biden has also said that he will not raise taxes (nor eliminate the 1031 Exchange) for those taxpayers that make less than $400,000.  What he fails to tell people is that your "income" is generally defined as your Adjusted Gross Income or AGI.  AGI includes any capital gains from the sale of real estate and other assets.  The sale of real estate could easily push taxpayers into the above $400,000 AGI category for the year in which they sell stocks, bonds, mutual funds, real estate, etc.  It is taxpayer beware.