For 100 years, 1031 exchanges have allowed investors to defer capital gains taxes from the sale of commercial real estate and reinvest that money into new properties. The strategic reinvestment in redeveloping underperforming properties generates numerous economic benefits including:
Jobs
Labor income
Property taxes and Federal taxes (far in excess of the Federal taxes deferred)
In recent years, the Black American community has increased its share of the commercial real estate investment market through the use of 1031 like-kind exchanges. This has allowed many to make critical reinvestments in their communities, while simultaneously building personal wealth.
The American Families Plan’s proposed cap on 1031 exchanges at $500,000 is shortsighted and counterproductive for many reasons. Restricting 1031 exchanges right now would severely diminish many taxpayers’ ability and willingness to reinvest in commercial real estate and redevelop properties.
Recovering from the Pandemic
COVID-19 has forced countless shopping malls, hotels, office buildings, and restaurants across the nation to close their doors. We will need substantial reinvestment from every available resource to redevelop commercial spaces if our national, regional and local economies are to regain strength.
1031 exchanges encourage that needed reinvestment.
Nationally, Ernst & Young estimated that the reinvestment through 1031 exchanges for the coming year will create more than 560,000 new jobs paying more than $27.5 billion in labor income, generate $14 billion in federal, state and local taxes and add $55 billion to the GDP.
For many middle-class Black Americans, 1031 exchanges have presented new opportunities to:
Plan for a comfortable retirement
Create intergenerational wealth
Grow business interests organically without overreliance on debt
Reinvest in their communities
A cap on 1031 exchanges would remove those opportunities and reinstall daunting barriers to the commercial real estate marketplace at a time our economy needs every willing investor.
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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