According to 1031 exchange expert David Moore, Washington is considering changes to 1031 exchanges as part of their tax reform discussions. At this point, says David, there are plusses and minuses for investors.
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Today we’re talking with David Moore, co-founder of Equity Advantage, a firm that specializes in tax deferred investments, in particular IRS section 1031 exchanges.
David, as a 1031 exchange expert, what have you heard about changes coming?
Well the industry’s actually breathing a sigh of relief for the most part because the code is going to still be in force and a factor, which is nice. We were really concerned whether or not it would even exist with some of the talk that was going on. The biggest change that we sort of see is that the heading of section 1031 is actually being amended, striking property and inserting real property, so that’s implying that we’re actually going to be changing what we’re able to work with. Although the code’s being left intact and in force, it appears we’re going to lose the ability to do some personal property transactions and collectibles, I’m sure is what the target to the bullseye is as far as elimination at this point in time.
Can you give us some examples of how that would impact investors?
David Moore: Well I guess what I would tell our clients with cars and collectibles, they’d better check with their tax people because there’s a possibility they won’t be able to use 1031 after the end of this year, so I guess that’s the big negative. I’m going to miss seeing all those nice cars coming through as far as exchanges go. On the bright side it appears that the partnership exchange process is going to be simplified, and what I mean by that is one of our biggest issues with 1031 has historically been partnership interest. If the group of us own an asset we typically own the property as a limited liability company in today’s world, and that LLC could go forward and exchange, but if the members want to go different directions we had to do something called a drop and swap, or swap and drop.
The change that’s been proposed would be that the partnerships that they’re filing is passed through, that the individual members actually own the asset, not the membership interest in the property so they can actually do the exchange of those assets without having to do that drop and swap, which would certainly make our life a lot easier and would enable our clients to sleep better if they’re ever questioned on what had happened in the exchange.
Thank you David. Listeners may call 503-635-1031 or can visit 1031exchange.com for more information.
As the tax reform process works its way through Washington, be sure to keep in touch with professionals like Equity Advantage so that you know what impacts it may have on your investments. Give us a call today!
