Published by MSN Money | May 3, 2021
Biden’s plan would limit the capital gains break on a like-kind exchange to transactions under $500,000.
President Joe Biden’s American Families Plan contains a provision sharply cutting back, but not eliminating, the 1031 exchange tax break that originated ironically enough exactly 100 years ago.
A 1031 exchange — also recognized by the IRS as a like-kind exchange — enables real estate investors to defer the capital gains tax liability on the sale of an investment property by using those proceeds to buy another property.
Biden’s plan would limit the capital gains break on a like-kind exchange to transactions under $500,000, the latest in major changes to what originated as Section 1031 of the Internal Revenue Code in 1921.
Arguments for and against limiting the like-kind exchange break are laid out in this Bloomberg article, which says that this year, the tax break will save individuals about $5.7 billion and corporations about $2.3 billion, according to Congress’s Joint Committee on Taxation.
To gain some additional perspective on the proposed limits, The Motley Fool turned to Charles Clinton, CEO of investing platform EquityMultiple, and Paul Getty, CEO of First Guardian Group, an investment firm that includes a specialty in 1031 work, for answers to a few questions about the proposed new limits.
