Popular RE tax break 1031 exchange may be wiped out

Some in Congress want to drop the like-kind provision to finance a tax cut

Miami /
Jun.June 13, 2017 01:30 PM

The 1031 exchange, a tax break used extensively in the commercial real estate industry, could disappear if a lower tax rate is passed by Congress.

The tax break gives sellers of real estate and other asset types the opportunity to defer capital gains taxes by reinvesting in “like-kind” properties. But lobbyists and Capitol Hill officials working on tax legislation have told the Wall Street Journal that, even if a sweeping federal tax overhaul doesn’t go ahead this year, a more modest tax-rate cut may still wipe out the tax advantage.

Some members of Congress are looking at cutting the 1031 exchange to finance the rate cut, according to the newspaper. The exchange was threatened by the House Republicans’ tax-overhaul plan dubbed “Better Way,” but that particular plan included some attractive provisions for the real estate industry. Real estate lobbyists now claim that, with Better Way less likely to be passed this year, the industry may now lose the break without any sweeteners.

Like-kind exchanges are used in between 10 and 20 percent of commercial real estate transactions, according to advisory firm Green Street.

Jeffrey DeBoer, chief executive of lobbyist group Real Estate Roundtable, told the Journal that losing the 1031 exchange would “cause a lot of transactions not to occur.”

The Trump administration revealed its tax reform plan in April, proposing massive cuts to individual, corporate and other business taxes.

The plan may render the country’s mortgage-interest tax deduction useless to as many as 25 million Americans, according to analysis last month from property-data provider Trulia.  [WSJ]Miriam Hall


Related Articles

arrow_forward_ios
Aventura Mayor Enid Weisman (Facebook via Weisman, Getty)
Aventura votes to require HOAs to submit critical reports within 48 hours
Aventura votes to require HOAs to submit critical reports within 48 hours
Blink’s Michael Farkas and Lionstone’s Diego Lowenstein with 605 Lincoln Road (Google Maps)
Blink buys office condo on Miami Beach’s Lincoln Road for new HQ
Blink buys office condo on Miami Beach’s Lincoln Road for new HQ
Photo courtesy of David Iglesias
Boca Beach House condo project scores $43M construction loan
Boca Beach House condo project scores $43M construction loan
Nick Rojo and Jeff Burns (Affiliated, iStock)
Affiliated Development launches $125M workforce housing fund
Affiliated Development launches $125M workforce housing fund
Tom Cabrerizo and 6790-6880 Southwest 80th Street (Google Maps)
Developers score $15M construction loan for Miami townhouse development
Developers score $15M construction loan for Miami townhouse development
Triton Center (iStock)
Questions surround $50M in EB-5 investments tied to former INS building: lawsuit
Questions surround $50M in EB-5 investments tied to former INS building: lawsuit
Michael S. Liebowitz and Russell Galbut (Linkedin)
Russell Galbut and partner launch blank check company, plan to raise $100M
Russell Galbut and partner launch blank check company, plan to raise $100M
Southland Mall, 20505 South Dixie Highway in Cutler Bay with JLL's Tom Hall and Danny Finkle (Google Maps, JLL)
Southland Mall’s troubled $65M CMBS loan for sale
Southland Mall’s troubled $65M CMBS loan for sale
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...