Friday, December 26, 2014

Like 1031 Exchanges? It's Important to Let Congress Know.

by Greg Frick & Spencer Marona

The President's 2015 Budget Proposal for Section 1031 of the Internal Revenue Code, the Tax Deferred Exchanged provision could be a game changer for commercial real estate owners.

Tax reform has been a popular election topic, so it's likely there will be tax reform bills introduced in February. All the recent tax reform proposals have included some limitation or elimination of 1031 Exchanges, so it is likely to be incorporated in these future tax reform bills.

A 1031 Exchange defers the tax ordinarily due upon the sale of investment property; it is not a tax deduction. Because investors have 180 days to reinvest in a like-kind investment property, it then becomes an economic stimulant which boosts our economy. The taxes are eventually paid once the investment property is sold and no reinvestment is made. Breaking this cycle would be detrimental to taxpayers and businesses, small and large, nationwide.

You can read more the risks and expensive consequences if this passes in an article published earlier this year on

45 percent or more of the current real estate transactions occurring nationally are utilizing a 1031 Exchange. What can you do today?

Send an email to Congress, write a personal letter, and/or share your 1031 Exchange experience. Visit the Federation of Exchange and Accommodators for guidance on doing any of these actions.

In addition, call an HFO broker to discuss whether a sale and 1031 Exchange of your multifamily is worth considering in 2015. For questions regarding tax implications for your specific situation, please consult with your accountant. In our experience, HFO clients have been more informed by scheduling a meeting with an HFO broker, their accountant, and/or financial advisor at the same time.

More information on this topic can be found by viewing the video below and in the Department of Treasury's General Explanations

IPX1031 Exchange services will continue with its advocacy campaign of sending letters to Congress saying NO to 1031 Exchange tax reform. To date, almost 16,000 letters have been sent to Congress via IPX’s website

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