(December 19, 2020): Since the enactment of the Tax and Jobs Act in 2017, pundits have commented on its economic consequences. However, misconceptions continue to enter the conversation around "like-kind exchanges." This is probably due to a lack of understanding regarding the rules found in Section 1031 of the Internal Revenue Code. The like-kind provision enables taxpayers to defer paying some taxes when they exchange an investment or business property for another investment property of equal or greater value, instead of using the cash for other purposes. The provision, which addresses the payment timing instead of tax forgiveness, has been part of almost a century's federal tax code. The question is, do 1031 real estate or like-kind exchanges only favor the wealthy, and should they be repealed?
According to some, they should. Section 1031 underwent greater regulation, thanks to the shifting political spectrum. This means that exchanging personal property isn’t allowed, including patents, artwork, livestock, machinery and equipment, vehicles, and fast-food franchise licenses. However, for taxpayers who once utilized like-kind exchanges for personal property, such as collectibles, it may offer a mechanism to defer certain tax liability.
Nevertheless, eliminating 1031 exchanges won't just stifle domestic economic growth, but it may also fail to produce additional tax dollars for the government. In fact, 1031 exchanges actually stimulate the economy, create jobs, and encourage investment. How? Let Sera Capital explain this to you in more detail.
Sera Capital works in the Delaware Statutory Trust (DST) or 1031 exchange space as a Registered Investment Advisor as well as an investment fiduciary. Sera Capital thinks it's important that you understand how most of its competition works and what sets it apart from them before you take the plunge. Get in touch with them at (443) 873-1440.
For more information, Please visit https://seracapital.com/real-estate/