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The Importance of 1031 Exchanges

Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property, a process known as a 1031 exchange. This is an important tool used by businesses of all sizes, farmers, and middle-class taxpayers to transition into locations that more efficiently meet their need.

The American Families Plan's proposed cap on like-kind exchanges at $500,000, which would greatly impact larger investors who are repurposing and renovating commercial real estate in a post-pandemic economy. The COVID-19 pandemic has imposed unexpected, unprecedented trauma on commercial property - particularly retail, hotel and office space. A significant percentage of this property throughout the country may need to be repurposed.

These are the types of large-scale projects that revitalize entire neighborhoods, generate significant job growth, and result in widespread community improvement. Section 1031 is an effective tool to encourage the highest and best use of properties, without disrupting markets, allowing businesses to continue contributing to their local communities, rather than becoming shuttered blight.

By following the link on the button below you can send a letter to your elected representative opposing the proposals to eliminate IRC section 1031 and to support retention of 1031 Exchanges in the law's present form.