House Republicans are working on a proposal that, as part of an overall streamlining of the Internal Revenue Code and a reduction in tax rates, may eliminate or seriously restrict the use of tax-deferred exchanges — property swaps — under Section 1031 of the code. President Trump has identified tax revision as one of his top priorities, and legislation is expected to move quickly in the new Congress.
Loss of the ability to use an exchange would be a significant blow to “Mom and Pop” and other small-scale realty investors. According to a study posted on the website of the National Rental Home Council, there were 15.7 million rental homes in the United States as of 2015, and 99 percent of them were owned by noninstitutional investors. A study by professors at the University of Florida and Syracuse University estimated that most exchanges involve relatively small properties; in 2011, 59 percent had a sale price of less than $1 million.
So turns out 1031 is mostly used by moms and pops, not big guys like Trump. No wonder he doesn’t care. Isn’t it ironic getting a real estate developer in White House turns out so bad for real estate? This will be strike 2, after the FHA fee hike.
Frankly, not sure why this is coming up so early. It is a relatively small item when you think about it. First, he wants to restrict trade and now this which studies have proven to be beneficial.
Can I revive my thread on why women and even hispanics voted for this guy??? Remember, I went against my party and voted for Hillary.
Why should they be tax exempt when other investment types aren’t? If you think about the whole country, it should help make homes more affordable for non-owners. They are a way bigger voting block than landlords.
1031 is a really small potato in the tax scheme, since a really small number of people use it. How many of you have actually done 1031？
1031 or not, its impact should be negligible for the housing market. Its impact on tax revenue is also negligible.
In terms of lobby, which organization is in favor of 1031 other than realtors? I hope they will keep 1031, but if you remove1031, property ownership will change less and its impact on price could be positive.
Well, keep in mind 1031 exchanges include not just residential real estate but businesses potentially. Hopefully this will be fully vetted because you don’t want to say no to all exchanges. That could have a huuuuuge impact. Unless capital gains taxes go way down I suppose but still…
Good point on capital gain tax. We should remove capital gains tax and corporate tax so that USA will become the world’s best country for attracting investment. If we do that, no one will complain about the job market ever.
It’s not just 1031, it’s that plus removal of mortgage tax advantage, plus premature hiking interest rates, plus the brain drain that will result from unconstitutional immigration actions. Many smart people are going to be delaying home purchase, moving overseas. All the smart people. Bigly. This kills all your housing market.
If and when real estate market tanks most people will not buy. Just rewind back to 2010 or 9 and it was a truly scary time. Looking back everyone has 20/20 vision.
We need another 40 years to have a chance of repeat of 2008. 8 years of Trump deregulation, 8 years of D regulation, 8 years of R, 8 years of D, another 8 years of R, and a repeat of 2008 when the future Obama takes over.
A repeat of 2008 needs 48 year cycle, it needs complicated interactions of R and D over 48 years to produce a spectacular failure.
For the next 8 years, it will be sunny mostly. Some cloud could be come, you may have a little rain, but no hurricanes, not even real storms.
Trump inherits a strong economy from Obama. It’s up to him to eff it up. I am truly afraid trump may go to war with China. That’s the ultimate bear case. Even a trade war will be extremely damaging.
No I am not selling anything. Yet. I am turning weary, and will watch carefully.
Another scenario in which a 1031 strategy might help, as long as clients have two years of lead time, is in financing a summer home or future residence. If the clients have a rental property, they can sell that and exchange it for a home in a vacation spot of their choice and then rent that vacation property for two years, so they satisfy the IRS’s requirements for the 1031 exchange. After that, the place is theirs to enjoy forever after — no capital gains tax payments required.
But the devil is in the details. According to Alan Soltman, a CPA with Merlis, Soltman, Green & Associates in Los Angeles, who works with Detanna, the IRS will not challenge that the dwelling qualifies as a like exchange under 1031 if it is leased at least 14 days at a fair rental in each of the first two years after the exchange.
But if the clients use the home during the two-year holding period, limitations apply. For a 1031 exchange, the property owners’ personal use cannot exceed the greater of 14 days or 10% of the total number of days the property was rented at a fair market price, Soltman says.
Oh boy, oh boy! I was so busy I forgot this forum…LOL
Back to business.
You are complaining about the 1031 going away, why? This is a taxable pay now event that you postpone forever if you don’t sell. Right? Can the homeowner enjoy that? Yes, no?
What it has been my point is that you guys enjoy so many entitlements the regular home owner doesn’t have, be happy about it.
And I repeat the experience with my former country. You buy a house, or 20 houses, deal with it. No depreciation, no tax favors, nothing! You are on your own! And people still get rich. Get it?
And, save me the crying will ya. You don’t buy real estate, others will.
The sky is the limit. Don’t panic, so much diversion and BS around. Other than that, nothing that guy says is becoming true. From the wall and his threat of government shutdown to everything. Don’t pay attention to kids!
Uncle Sam claims to be for home ownership for most yet some of their policies are against that.
Prop 13 should apply to one owner-occupied home only.
In Singapore, you have to pay ABSD if you owned more than one home :), PR and foreigners pay more.
Home ownership in Singapore is about 91%.
Don’t pay attention to kids!