The basic idea behind Section 1031 is that a taxpayer is simply exchanging one property for another of "like-kind." Subsequently, the taxpayer receives nothing that can be used to pay taxes. The taxpayer's investment is continued by replacing the old property. Because all gain is locked up in the exchanged property, no gain or loss is claimed for income tax purposes.
The 1031 Exchange has long been thought of as a factor that encourages real estate sales of investment properties. Eliminating or reducing the benefits of these transactions could have negative consequences on the real estate market. Stay tuned for future Tucker's Tips to gain updates on this development.
P.S. If you support 1031 Exchanges (which Tucker's Tip certainly does), please consult your Congressman.
Contact me at 434-951-0858 or Tucker@TGBLaw.com if you have questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.