How elimination of 1031 exchange could impact RE investors; Rose Law Group Partner, Transactional Dept. Director Cameron Carter comments.

By Alyssa Tufts | AZBigMedia

Real estate is one of Arizona’s most powerful economic drivers in Arizona. However, certain real estate investors could see a decline in profits and their income tax rate could increase if a plan Democratic Presidential nominee Joe Biden proposed is enacted.

Biden recently announced a $775 billion plan to boost Child and Elderly care. The decade-long plan will be paid for by reducing or eliminating 1031 tax breaks for real estate investors who make more than $400,000 a year. The new policy will put more emphasis on Cost Segregation Studies to reduce tax liability in the context of none or reduced 1031’s.

A 1031 exchange is a swap of one investment property for another that allows capital gains taxes to be deferred. If a real estate investor is considering a 1031, the properties being exchanged must be considered like-kind in the eyes of the IRS for capital gains taxes to be deferred; if used correctly, there is no limit on how many times or how frequently 1031 exchanges can be done, and the rules can apply to a former primary residence under specific conditions.


“Elimination of the 1031 exchange will undoubtably have dramatic, and negative, effects on Arizona’s economy and workers, and I hope that both voters and policy makers will seriously consider that before advocating for such a major change in tax policy.”

Cameron Carter, Rose Law Group Partner and Transactional Department Director
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September 2020