CRE industry playing defense to preserve 1031 tax benefits

By Patricia Kirk | Wealth Management

Despite raising it as a possibility on the campaign trail, modifying or repealing the treatment of the tax benefits of like-kind exchanges has not been part of President Biden’s proposed tax reforms to pay for social services. That doesn’t mean that commercial real estate associations are standing pat, however. They have been actively advocating to preserve Section 1031 of the U.S. Internal Revenue Code, which defers capital gains taxes on property sales if the gains are reinvested in “like-kind” properties of equal or greater value.

Attention on the issue was first raised back in July when Biden outlined his proposed $775 billion “Caring Economy” Plan, which would provide funding for child and elderly care. The released 10-page proposal included eliminating the tax benefit for investors with incomes over $400,000 to help pay for the plan. More recently, with a potential $2 trillion infrastructure bill on the agenda, industry insiders are keeping a watch on like-kind exchanges as a potential funding mechanism for the bill.

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