House Tax Bill Repeals Personal Property Exchanges, but Preserves Real Property Exchanges

On November 2, 2017, Kevin Brady, Chairman of the Committee on Ways and Means, released the “Tax Cuts and Jobs Act” (H.R. 1). The House tax bill proposes eliminating personal property 1031 exchanges after the end of 2017. In addition, the House tax bill proposes a transition period for any personal property exchanges started before December 31, 2017. The House tax bill proposes full expensing for most personal property purchases for five years.

There are no proposed changes to 1031 exchanges of real property in the House tax bill.

Senate Tax Bill Repeals Personal Property Exchanges, but Preserves Real Property Exchanges

On November 9, 2017, the U.S. Senate Committee on Finance released the “Description of the Chairman’s Mark of the Tax Cut and Jobs Act.” Under the heading “Like-Kind Exchanges of Real Property” is the description of the proposal. The proposal modifies the provision providing for nonrecognition of gain in the case of like-kind exchanges by limiting its application to real property that is not held primarily for sale. The proposal generally applies to exchanges completed after December 31, 2017. However, an exception is provided for any exchange if the property disposed of by the taxpayer in the exchange is disposed of on or before December 31, 2017, or the property received by the taxpayer in the exchange is received on or before such date taxpayer in the exchange is received on or before such date. The Senate tax bill proposes full expensing for most personal property purchases for five years.

There are no proposed changes to 1031 exchanges of real property in the Senate tax bill.

The Joint Committee on Taxation (JCT) projects these changes to Section 1031 will increase tax revenues by $30.5 billion between 2018-2027.

We are grateful to the many members of Congress who listened and acted to preserve Section 1031 exchanges. You can thank your congressional representatives by sending a letter through www.1031taxreform.com/take-action.

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Important Information for Investors Beginning a 1031 Exchange

From October 17 – December 31, 2017

Do Not File Your 2017 Income Tax Return Until Your Exchange Has Been Fully Completed.

The time frame you have to complete the acquisition of your replacement property ends at midnight on the earlier of the 180th day after the date you transferred the relinquished property OR the due date (including extensions) for your income tax return for the taxable year in which the transfer of the relinquished property occurs. (U.S. Treasury Regulations section 1.1031(k)-1(b)(2)).

This means, if the 180th day following the closing of your first relinquished property falls after the due date for your 2017 tax return (this year, for individuals, April 17, 2018) you must file an application for extension of time with the IRS to extend the due date. If you do not file for an extension, you will NOT be able to acquire any replacement property in your exchange after your tax return due date.

Remember:
If your exchange is not completed by the due date of your tax return —
FILE AN EXTENSION.

If you have any questions, please call your Exchange Counselor at

National Headquarters: 800.282.1031
Eastern Regional Office: 866.394.1031

Live Webinar: 1031 Exchange Issues in 2017

Join our one-hour 1031 exchange webinar for tax and legal advisors (CPE credit available) on Monday, December 4th at 11:00 a.m. EST. This webinar tackles issues such as reverse and improvement exchanges, related party issues and how to avoid common pitfalls. You will receive a summary of current developments regarding possible tax reform and the implications on 1031 exchanges. Save My Seat

Call Us

Asset Preservation would appreciate the opportunity to work with you on your next exchange regardless of how simple or complex. Give us a call at 800-282-1031 with any 1031 related questions or Open a 1031 Exchange Online.

API is committed to providing its exchange customers with unmatched service, and the highest level of security available in the 1031 exchange industry. From the customer’s first contact with an API representative, API’s professional exchange counselors, attorneys and accountants work together to meet the customer’s service needs in order to ensure a smooth transaction with no surprises. In the background, API’s management maintains tight financial controls and multi-layered security systems necessary to provide a level of comfort and performance quality relied on by sophisticated investors and corporate America; we call it the “The API Advantage™.”