Washington Update – 1031 Under Attack

Written by instructor Patty Flowers. Patty Flowers is AVP for Investment Property Exchange Services (IPX1031®) and a Certified Exchange Specialist®. See her website

 

Patty Flowers

Patty Flowers

1031 Exchanges have been an integral part of real estate’s recovery. Now the government is proposing to eliminate all 1031 Exchange activity.

For decades, real estate investors, business owners and Fortune 500 companies have used 1031 Exchanges to defer the payment of capital gains tax and depreciation recapture tax associated with the sale of their investment properties. 1031 Exchanges also allow taxpayers to maintain or diversify their portfolios and increase their purchasing power. Any investment property or property held for productive use in a trade or business, ranging from vacant land to shopping centers, can be exchanged. The taxpayer must simply purchase new qualifying real estate and follow some basic rules to complete a tax deferred 1031 Exchange.

Even though 1031 Exchanges have long been recognized as a major factor in encouraging real estate sales, as part of tax reform in separate Discussion Drafts, the House of Representatives, Senate and the President’s Budget Office have all proposed eliminating or sharply curtailing the benefits of Section 1031:

  1. House Ways & Means Committee Chairman Dave Camp released a Discussion Draft of his Comprehensive Tax Reform Proposal on February 25, 2014. The Camp Proposal would repeal Code Section 1031 for like-kind exchanges occurring after 2014.
  2. Senate Finance Committee Chairman Max Baucus’ tax reform Discussion Draft includes a proposal to repeal Section 1031 in its entirety. The proposed repeal would apply to exchanges made in taxable years beginning after December 31, 2014.
  3. President Obama’s 2015 Budget proposal also contains significant changes to IRS Code 1031. The President’s proposal does not eliminate 1031 Exchanges, but limits the amount that can be deferred to $1 million per taxpayer per year.

The elimination of 1031 Exchanges will result in a sharp decrease in real estate transactions. Due to its severe impact on all areas of the real estate community and how this could potentially affect you, IPX1031® will keep you up to date on these proposals. Simply send an email to info@ipx1031.com to be added to the “Washington Update” list.

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Everything You Need to Know to Defer Taxes

Written by Patty Flowers. Patty Flowers is AVP for Investment Property Exchange Services (IPX1031®) and a Certified Exchange Specialist®. See her website

As we roll into the summer, it’s refreshing to see continuing economic improvement mirroring the growth of income property sales and 1031 Exchanges. However, the excitement of an increased property sale value can be quickly diminished with unexpected taxes. Many real estate investors are surprised to learn that taxes on their profits are substantially higher this year. When investment real estate is sold in 2013, some taxpayers could pay up to 20% capital gains tax, a 3.8% healthcare tax, depreciation recapture tax and varying state imposed taxes. Added together, these taxes can total anywhere between 30-40%, making 1031 Exchanges an invaluable wealth preservation tool.

Tax deferral is the hot topic in the real estate community and a 1031 Exchange still allows taxpayers to defer all of these taxes by simply rolling their profits into another property or properties. While the concept of a 1031 Exchange is straightforward, some investors and advisors may not have participated in a transaction for many years and may need to be updated on how to properly execute a 1031 Exchange.

Know your options and make informed decisions for your next 1031 Exchange transaction. Register today for IPX’s two complimentary webinars!

A 1031 Exchange Introduction and Refresher Webinar

This webinar will be held on June 12th and will provide a comprehensive foundation of 1031 Exchange information. Learn the basic rules and regulations and how to apply these to your transaction for maximum benefits.

Click here to register for the June 12th webinar

Advanced 1031 Exchange Issues Webinar

This webinar will be held on June 19th and will discuss the most recent changes in tax deferred exchanges and will cover topics such as reverse exchanges, build-to-suit exchanges, using seller financing in a 1031 transaction, and related party issues.

Click here to register for the June 19th webinar

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