Eliminating the 1031 Exchange Will Not Raise Taxable Revenue

Eliminating 1031 Exchange

Everybody's worried about tax reform and what might happen if Congress rushes a hastily prepared tax bill through. One revenue raiser that some bipartisan committees have talked about is eliminating section 1031. They speculate that by eliminating the tax deferral of 1031 that the coffers of the government will be increased dramatically because all of these sales will now become immediately taxable. But will this tactic actually work to raise taxable revenue?

The Reality of the Situation

The reality of the situation is that rather than selling properties in taxable transactions, most people will hunker down and simply refuse to sell their property if they have the immediate disincentive of taxation looming.

If the 1031 exchange is eliminated, the volume of sales will not continue at the same pace. The reality is if you don't have a vehicle to defer gains people will simply not sell. As a result, there will be less revenue, less velocity in the marketplace, and less capital flowing where it needs to go in the economy.

Preserving the 1031 Exchange

If tax reform is needed and simplification is sought let's keep this old code section that's been around since 1921 that works great to organically grow and stimulate the economy. Keep the 1031 exchange, which serves a vital function both in the tax code and in the economy.

  • 1031 Hotline: If you have questions about 1031 exchanges and tax reform, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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