Political changes can have a huge effect on investment climate. In this episode, David Moore explains current thinking on 1031 Exchanges with the new administration.
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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.
Are there any changes coming to 1031 Exchanges in this administration?
David Moore: That’s an interesting question, and if you go back six months or actually a little bit more than six months now, just before the election, I was asked to do a segment for a commercial real estate brokerage on the two candidates and what they would do with Section 1031. At that point in time, it looked like we’d have a President Clinton again, so we ended up doing the interview based upon her winning and assuming that she was just going to go forward with everything that our past President Obama had put forward, so the industry and the real estate community was not very excited about that.
NO REFORM PLANS IN MOTION CURRENTLY
There was some relief when President Trump won, and then shortly thereafter, the Federation of Exchange Accommodators, our trade organization for our industry, sends out this frantic email that now we’re in a worse spot than ever because now we’ve got all three branches of government in the hands of the conservatives and tax reform’s going to happen and 1031’s are on the chopping block, which historically had been something that conservatives—we always knew that they liked 1031—and here we have a president that has used 1031, and everybody thought, ‘well that would be a good thing’. With a mass of sweeping tax reform effort, there is talk of 1031 being threatened.
Our industry is sort of upset and frantically trying to do things and reaching out to people to save 1031. Our company’s position, my position on it is: we really don’t know. We have no idea what they’re going to do. I think the President’s running into roadblocks he didn’t expect would happen, but when we look at what’s been proposed with 1031 as an alternative, it would be a situation where it wouldn’t really be a taking 1031 away with nothing else there. It appears at this point there would be an alternative that would render 1031 useless in some ways, but then again as with virtually everything, you’ve got a double-edged sword. What they’re talking about is you sell, you realize the gain, but if you bought within a certain period of time, you would totally expense the purchase price, excluding dirt. You wouldn’t need 1031 if that were the case.
LACKING REAL SPECIFICS
Now the problem is that that’s sort of bundled in with the tightening of the regulations, what qualifies, what doesn’t qualify. We have no idea on how that would really impact it would be how much time do you have to make this purchase to offset that gain? There’s many, many questions, no answers, because we don’t even have written, hard, black and white proposals yet. That’s the rumor in the industry and it’s interesting because I get calls. “Hey, I hear it’s going away.” That’s not true at this point. I’ve been doing this for more than 25 years. Honestly I get tired of fighting this every few years, so it’d be nice if we could get some guidelines, see what’s happening, but as soon as we hear anything’s going to be happening with it, good, bad, or no different, we’re going to certainly be reaching out and giving word out to the streets.
At this point in time, we don’t know. The rumor is that there would be some change even from the inside the Trump camp, there is talk is of some change to it or elimination of it. Until we have some details of what else is out there, I can’t really reach out to my clientele.
No one can predict the future, but it’s critical to have investment professionals on your side like David Moore and his colleagues at Equity Advantage. They’re staying on top of the latest developments. Call 503-635-1031 for more information.
