IRS Proposal Would Cut Benefits of 1031 Exchanges

IRS 1031 Exchange Proposal

The Tax Cuts & Jobs Act that went into law earlier this year preserved like-kind exchanges of real estate (though it axed personal property exchanges). A recent regulation proposal from the Internal Revenue Service would diminish the benefits of exchanging property. In this article, we are going to discuss the recent IRS proposal and its potential impact on the economy.

IRS Proposal

The IRS is responsible for interpreting the new tax law and how it impacts taxpayers. When Congress passed the TCJA and preserved like-kind exchanges, they did not specify how investors should determine their cost basis for such exchanges. The new IRS proposal would set this cost basis much lower than anticipated, essentially penalizing investors who choose to do 1031 exchanges of property.

Economic Benefits of the 1031 Exchange

The purpose of section 1031 of the IRC is to stimulate investment and (as a consequence) economic growth. If the benefits of exchanging property are diminished, more and more investors are simply going to not sell in order to avoid a tax windfall. That can have an adverse impact on the economy as a whole – if investors don’t continue putting money into the real estate market in continued investments, it can lead to economic stagnation.

Get Help with Your Exchange

For assistance with your next 1031 exchange of real estate, contact the qualified intermediaries at Commercial Partners Exchange Company! Our intermediaries have been helping clients in Minnesota and across the country with their exchanges for over twenty years. We can prepare your 1031 documents, answer all of your questions, and advise you every step of the way. Give us a call at our downtown Minneapolis office to get your 1031 exchange of real property set up now.

  •  Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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