Latest GAC 1031 + Tax Update = Good News For Investors

David Moore: Hello. David Moore, Equity Advantage, 1031exchange.com and I just want to give a brief sort of update on where we are with tax reform. It’s actually September 22nd, 2021. And we did last week got notice that 1031 at this point is officially okay. I want to stress at this point in time, 1031 is not scheduled to be amended, changed, eliminated, any of that. We’re not looking at any of those issues we were considering with the half million per person per year on deferral cap. It’s officially been preserved at this point in time.

Not to say that couldn’t go forward and have a problem going in the not too distant future it seems like. I was talking with my wife a couple days ago and in the 30 years we been involved with this, seems like every few years we deal with it. Last time we were defending it was back in 2017. Hey, four years later, here we are again. But at this point in time, looks like 1031’s going to be preserved as is.

David Moore: The other thing that I just want to mention, that I’m very concerned about is people going mark to market on distributions from limited liability companies. Right now we’ve got a situation, rarely do we use S corps and C corps to hold real estate because if a group of us own property via S or a C Corp and we want to go different directions, just getting the assets out of the entity are going to destroy any benefit of 1031. And it was actually proposed in tax reform that that same type of treatment would be applied to limited liability companies. And anyone out there that uses LLCs knows that there would be a tremendous Problem. Hopefully that does not go forward. Hopefully that goes away.

It looks like we will have an increase in capital gains tax. We don’t know exactly how much that might be. It might just be a bump of 5% or so. We can live with that. The bigger concern I’ve got still is that the possibility of retroactivity. Lots of people are trying to get deals done right now. And if you look at the bill’s initial proposals, tax increases would be effective 4/26/21. People that are getting deals closed now, paying their tax they’re hanging out there a little bit. They’re a little bit in jeopardy until we get some clarity.

David Moore: Now, with that said, I can’t imagine that they pass this and go retroactive on the increase in capital gains without major, major your judicial action, it would seem like. We’re going to have lots of people coming after them and suing them for that change. I don’t know if retroactivity is something that’s even plausible, even if they propose it and they pass it, I don’t know when we really look at implementing it, whether it’s going to be able to go forward.

But just be aware if you’re selling something right now, you plan to pay the tax, my advice is talk to your tax people. This stuff is changing daily and you just want to have the conversation with your tax people so you can plan for whatever may come up.

David Moore: David Moore, Equity Advantage, 1031exchange.com. Hope you’ve appreciated this. Not appreciated it, but hope you get something out of it. And as anything changes, we’re going to be getting more word out. But if you’ve got questions on this or any other topic, 1031 or IRA, please don’t hesitate to reach out, David Moore, Equity Advantage, 1031 exchange change.com. Thank you. Take care, bye-bye.