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

Jun.June 13, 2017 01:30 PM

Donald Trump

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

Madison Realty Capital'a Josh Zegen and Fort Partners' Nadim Ashi  

Four Seasons in Fort Lauderdale scores $210M loan

Daily Digest Miami

South Florida home sales struggle in October, Cipriani and Terra plan luxury condo

Rendering of Sailboat Bend II

Affordable housing project in downtown Fort Lauderdale lands $27M loan

Rendering of the Brickell hotel development, Tony Cho and Robert Finvarb

Finvarb and Cho land construction loan for mixed-use hotel near Brickell City Centre

Developer borrows $105M, breaks ground for mixed-use Flagler Village project

Developer borrows $105M, breaks ground for mixed-use Flagler Village project

Neiman Marcus CEO Geoffroy Van Raemdonck (Credit: Getty Images)

Struggling Neiman Marcus scores loan from Credit Suisse for Coral Gables store

Developers land $74.5M loan for condo construction project at Ocean Reef Club

Developers land $74.5M loan for condo construction project at Ocean Reef Club

Ceiba Groupe's Managing Principal Adam Bedzow and a rendering of Suede Downtown Davie

Ceiba Groupe nabs $46M loan for Downtown Davie project