Obama budget to cap 1031 exchanges

1031 xchange2By AZRE

With the talk of tax reform that would repeal or limit 1031 Exchanges, the global effect of changing like-kind deals is in the spotlight.

Section 1031 Exchanges, or like-kind exchanges, are used in commercial real estate to allow investors to reinvest their profits into a new property through an exchange of a similarly valued property and defer the taxes from the sale.

The proposed limitation in President Barack Obama’s 2016 budget would cap a deferral of capital gain at $1M.

“Historically, Section 1031 deferral has been justified on the basis that valuing exchanged property is difficult,” according to the U.S. Treasury Department’s general explanations of the administration’s 2016 budget.

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