CREFC Joins Letter Defending Like-Kind Exchanges
April 16, 2024
Last week, CREFC joined 35 organizations in a letter to congressional leaders urging them to preserve Section 1031 like-kind exchange tax treatment for real estate. Click here for the letter.
Why it matters: The Biden administration’s 2025 budget once again seeks to limit the deferral-of-gain recognition.
- While the provision has virtually no chance of passing in the current Congress, CREFC and other stakeholders continue to educate policymakers on the importance of the provisions.
The big picture: In a like-kind exchange, an investor can elect to defer the taxation of capital gains on the disposition of investment or business-use real property if the taxpayer reinvests the proceeds in another property of a like kind, in a short window of time.
Go deeper: The letter highlights numerous arguments for preserving the tax treatment. Like-kind exchanges:
- Reduce the cost of capital and make the economy more efficient by getting real estate into the hands of new owners with the time, resources, and desire to restore and improve them;
- Increase the supply of affordable rental housing as multifamily represents 40% of real estate like-kind exchanges;
- Drive job creation, according to an Ernst and Young study that found in 2021 economic activity generated by like-kind exchanges supported 976,000 jobs generating $48.6 billion of labor income and contributing $97.4 billion to the U.S. GDP; and
- Generate state and local tax revenue, as well as property reassessments that increase the tax base, through the more frequent turnover of real estate attributable to section 1031.
The bottom line: Like-kind exchanges for real estate continue to have bipartisan support in Congress. But with numerous tax provisions expiring after 2025, the next Congress and administration will be highly focused on tax policy.
CREFC and its partners will continue to stress the importance of like-kind exchanges to policymakers throughout the legislative process.
Contact David McCarthy (dmccarthy@crefc.org) with any questions.