When investors or businesses structure their asset sale and replacement purchases as 1031 tax-deferred exchanges, they are able to defer paying capital gains and recapture taxes. The 1031 exchange is a powerful tool that encourages people and entities to reinvest their profits into newer, more productive property, stimulating business and economic growth. Though the proposed Republican tax reform plan does not mention eliminating 1031 exchanges, US Representative Kevin Brady, Chair of the Ways and Means Committee, is on record for questioning whether 1031 exchanges are necessary since the proposed tax plan allows for immediate expensing. Immediate expensing addresses some investments but it is not a substitute and does not replace the benefits of 1031 exchanges for many investors. Our recent article in Bisnow further explains the importance of keeping 1031 tax deferred exchanges in the tax code.
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