Do Not Repeal Section 1031 Like-Kind Exchanges
#SenatorBillNelson #SenatorMarcoRubio #RepresentativeRonDeSantis:As a voter in your district and state I urge you to oppose the proposals to eliminate like-kind exchanges and to support retention of IRC §1031 in the law’s present form. Section 1031 is a valuable tax planning tool that provides a powerful engine to the U.S. economy. Like-kind exchanges promote transactional activity that results in job creation and taxable income that fuels other businesses.
1. Repeal of §1031 will cause a decline in real estate values as investors will be motivated to hold on to properties and to invest in more liquid, non-real estate investments with faster returns. The proposals effectively impose punitive, targeted tax increases on economically sound commercial real estate investment, the likely unintended consequence of which will be similar to implementation of 1986 tax reform modifications that resulted in a recession.
2. Section 1031 has remained in the tax code since 1921, notwithstanding repeated Congressional scrutiny, because it is based on sound tax policy predicated on continuity of investment by the taxpayer, and is consistent with tax reform goals of efficiency, neutrality, fairness, and simplicity. It is widely used by a broad spectrum of individual and business entity taxpayers at all levels. Definitions of “like-kind” are well understood and §1031 exchanges facilitated by Qualified Intermediaries are not administratively difficult for the IRS or taxpayers.
3. Section 1031 like-kind exchanges are legitimate transactions, not abusive tax avoidance schemes. Payment of tax occurs: 1) upon sale of the replacement asset; 2) incrementally, through increased income tax due to foregone depreciation; or 3) by inclusion in a decedent’s taxable estate, at which time the value of the replacement asset could be subject to estate tax at a rate double the capital gains tax rate.
4. When the impacts of depreciation, the estate tax, and the economic stimulus from like-kind exchanges are considered, neither elimination nor restrictions to §1031 would result in additional revenue to the U.S. Treasury, an improvement to the tax code, or any benefit to the U.S. economy. Like-kind exchanges are revenue neutral over the long term because gain deferred is directly offset by a reduction in future depreciation deductions available for assets acquired through an exchange.
5. Like-kind exchanges contribute to the velocity of the economy by stimulating a broad spectrum of real estate transactions, and encouraging taxpayers to replace and upgrade machinery and equipment, thus stimulating purchases, sales, and manufacturing of machinery, equipment, vehicles and other assets.
6. Repeal of §1031 would tax cash flow because no profit is taken from the transaction. Section 1031 permits efficient management of capital and cash flow while investment is retained in the business.
The transactional activity stimulated by §1031 results in jobs in the real estate, construction, financial services, vehicle and equipment leasing, manufacturing, and other industries. Fewer transactions ultimately result in fewer jobs in these industries and in local small businesses that generate revenue from the after tax dollars of employed workers. Since domestic real estate and assets used predominantly within the United States cannot be exchanged for foreign based real estate and assets, §1031 directly stimulates reinvestment in U.S. communities and businesses, promoting job growth within our own borders.
If you have any questions, or wish to discuss any of these matters, please do not hesitate to call me. My number is (312)612-1031
Do Not Repeal Section 1031 Like-Kind Exchanges
LintonGlobal.com (Daytona Beach Shores, FL) Real Estate Team Mike and Peggy Linton Join South Atlantic Real Estate Group in Daytona Beach Shores, Florida. The Linton Team brings to the office a combined 57 years of experience in real estate and was formerly with Keller Williams Realty Florida Partners.
The Lintons specialize in the following types of real estate in Daytona Beach and the surrounding area:
- Oceanfront Condos
- Beachside Homes
- Commercial Property
- Single Family Homes
Mike and Peggy may be reached at (386)506-8848
The office is located at:
South Atlantic Real Estate Group
2422 South Atlantic Ave.
Daytona Beach Shores, FL 32118
The concept for South Atlantic Real Estate Group was several years in the making. The idea was first conceived in 2005 at a meeting held between Chris Pollard and some business colleagues. The concept was to create a “Real Estate Mall” offering all the services needed when doing Real Estate all under one roof. We wanted to be able to assist you from the beginning to the end of your real estate transactions. In 2013, South Atlantic Real Estate Group was formed. We secured our office space, moved in in August and officially opened for business on October 1, 2013.
Real Estate Team Mike and Peggy Linton Join South Atlantic Real Estate Group
I am often amazed that a lot of real estate investors have a very small or an almost non-existent network of fellow investors, peers, and service professionals. It can be disadvantageous to your business and investment portfolio to be isolated, as well as an unsatisfying way to invest. When a real estate investment team is removed from other professionals, it can have a number of negative effects.
Here are some of the drawbacks to going it alone as a real estate investor:
• No exposure to new strategies and creative approaches to investing. Many real estate investors that are isolated are probably following the same strategy that they have been using for years. They may be missing out on innovative strategies that could have a positive impact on their portfolio.
• Susceptible to Poor Performance: When you and your team are removed from other real estate investors, it can be easy to justify mediocre or poor performance without acknowledging that others performed better in similar conditions. By exposing your real estate team to other investment teams, you can develop a better understanding of how similar investors have performed and how you might copy their successes.
• Becoming blind to new risks. In the last couple of decades, the economy has become much more global and, consequently, more complicated for investors. Teams need to stay informed and in-the-loop on their investments and the countless number of risks that could hurt your portfolio. For professional real estate investors, it is important to build your network of contacts that can help keep you informed of all relevant information that could impact your investments and make you aware of various risks, from changes in lending to changes in real estate law.
• Lack of counsel and support. Many of the real estate executives that we work with are seeking to expand their peer network and meet other C class executives. Not only are there great business reasons for doing this, but on a more human level it can be satisfying to build relationships with like-minded individuals who have similar aspirations and challenges. These business relationships can help advise you on a problem that they may have experienced before or give you assistance through referrals, resources, and other helpful actions.
By developing a strong network of business partners, you will have a great network to complete deals, form new business partnerships and joint ventures, and grow your real estate holdings. For investors with substantial business interests, you may identify an off market property or land a new acquisition for your portfolio.
Our team constantly finds opportunities to introduce parties with similar interests and, in turn, many executives in our network make a point to make valuable introductions for us, such as another investment firm or a business that is looking to sell real property. You may not even have a clear way to benefit from your network, but it is worth developing the community now with the understanding that you will derive value in ways that you can’t foresee. Build it before you need it.
The Linton Global Real Estate Investment Team’s vision is to create a strong nationwide network of professionals whose common goal is to help each other achieve favorable results in business. If you are a professional and would like to network with our team, call us at (312) 612-1031
Gary Keller, D. J. (2005). The Millionaire Real Estate Investor. Rellek Publishing Partners, LLC. pg 157