With the changes in power in Washington D.C. many say that tax reform is imminent. One of the items often talked about is IRS Section 1031 Exchanges. 1031 exchanges are a common way to defer capital gains taxes by reinvesting sales proceeds or assets held for business or investment purposes. Eliminating or overturning Section 1031 would be disastrous not only for individuals or businesses motivated to use exchanges whenever they are selling a successful asset, but also for our economy.
1031 exchanges result in increased job creation, generation of substantial tax revenue, debt reduction, increased real estate activity and other benefits for our economy. A recent study showed that elimination of 1031 exchanges would result in a hit of between $60 billion and $131 billion to the economy over ten years.