Tip 13-2014: Possible Elimination of 1031 Exchanges

For many years, real estate investors and business owners have used 1031 Exchanges, and those transactions have helped to promote the recovery in the real estate world. Despite the benefits of 1031 Exchanges, as part of tax reform, the House of Representatives, the Senate, and the President's Budget Office have all proposed eliminating or greatly limiting the benefits of Section 1031 of the United States Internal Revenue Code.

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.
Charlottesville, VA
434-973-7474
www.TGBLaw.com