1031 Exchanges In The Crosshairs?

A major tax advantage for the commercial real estate industry may be one of the casualties in a sweeping federal tax reform expected this year, The Wall Street Journal reports.

Some lawmakers are eyeing the 1031 exchange provision to get the tax-rate cut they seek. The provision allows sellers of real estate and other assets to defer capital gains taxes by reinvesting any profit in “like-kind” properties. The 1031 exchange applies to a range of assets, but real estate accounts for the largest portion of exchanges at 36 percent, according to Ernst & Young LLP data.

The Joint Committee on Taxation estimated in 2014 that repealing like-kind exchanges could raise $40.6 billion in extra tax revenue over one decade. Several lawmakers consider the provision to be loophole that has limited economic benefit and, therefore, some are looking to put it on the chopping block in order to pay for lower tax rates. For example, Mark Mazur, the director of the Tax Policy Center, says 1031 exchanges “really have become just a way to defer tax liability.”

READ MORE: http://realtormag.realtor.org/daily-news/2017/06/15/1031-exchanges-under-threat?

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