The federal government’s tax overhaul will do many things. One thing it will not do, is take away the tax benefits available under IRS Section 1031 like kind exchanges of real property. The U.S. Congress did abolish Section 1031 exchanges for personal property.
Under Section 1031, a taxpayer who exchanges one investment property for another, can, under certain circumstances, dispose of the first property without immediate tax liability. Money not used to pay taxes, can be used to acquire the new investment property. This tax deferral may become an exemption upon the taxpayer’s death. In addition, there may be certain opportunities to utilize tax benefits of a Section 1031 exchange when dealing with second homes and vacation properties, and even primary residences. For further information on 1031 exchanges, click here to view the see the attached outline which was presented in October at our annual fall seminar, Critical Legal Developments, after developments and modified to reflect the recent inapplicability of personal property like kind exchanges. For more information, please contact Gregg Nathanson, Esq. or any of our real estate attorneys who specialize in counseling clients in 1031 transactions.