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1031 Exchange - Will It Go Away For Real Estate Investors?

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According to the Real Deal:

…Joe Biden went after one of the real estate industry’s favorite tax benefits Tuesday [July 21, 20120] when he proposed funding a child- and elderly-care spending platform by closing off a loophole used by property investors. The presumptive Democratic presidential nominee proposed eliminating 1031 “like-kind” exchanges for investors with annual incomes greater than $400,000, as part of his plan to finance $775 billion in government spending over the next 10 years on child care and care for the elderly…

The 1031 Exchange allows real estate investors to defer capital gains taxes if the investor buys more investment property with the proceeds of their sale. Starting in 1921, IRC code 1031 has helped real estate investors buy and sell more profitably, but according to Anthony Harrigan at Impact Wealth, the code has done much more.

The 1031 exchange has been under attack since its inception. But it hasn’t been defeated because Real Estate is an engine…”a driver of the economy in general” says Harrigan.

Harrigan also points out that the IRC 1031 doesn’t just benefit investors! There is a network of professionals that are affected. Think of real estate brokers, qualified intermediaries, banks, paperwork processors. One transaction can bring a lot of downstream activities.

Because Real Estate offers growth in investments outside of the stock markets, we don’t want to minimize that growth. If we do, we may see a drop in real estate prices.

Since the entire tax system is based on incentivizing and de-incentivizing activities, we could see less play in real estate. "And that doesn’t help anyone," remarks Harrigan.


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