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Investment & Exchange Opportunities
Investment & Exchange Opportunities

1031Gateway's posts

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Even Dynamic Scoring Shows Tax Reform Will Cost Hundreds of Billions. That's Not Revenue-Neutral!

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Trump Tax Reform Proposal Cuts Taxes on Corporations, Decreases Federal Revenue by 14%

"Currently, there are two major proposals to reform the federal tax code."

"President Trump’s plan would reduce the current corporate income tax rate, from 35 percent to 15 percent. At the same time, the plan would eliminate the corporate alternative minimum tax."

"The House GOP’s Blueprint would ... allow companies to write off or deduct the full cost of capital investments in the year in which they purchased them. This includes purchase of buildings, factories, plants and equipment, and inventories."

"Both plans would reduce the amount of revenue that the federal government would raise over the next decade. The Trump proposal... would reduce revenue by $5.9 trillion over the next decade, or about 14 percent of federal revenue. The House GOP proposal... would reduce revenue by $2.4 trillion over the same period, representing about 6 percent of federal revenue."

#taxreform #jobs #tax #congress #healthcare #education #trump

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The Unintended Consequences of Tax Reform

"If we eliminate 1031, deals will stop happening. That will cause property values to decrease. When property values decrease, then you can't even refinance out your equity and you're locked into the property and unable to sell.

The last time we had tax reform in 1986 the real estate market plummeted and it stayed down for a considerable time. That exasperated an already bad situation and created an unintended consequence with the savings and loan crisis, which all of us taxpayers ended up having to bail out. Eliminating 1031 is not a good idea. We need to preserve 1031..."

#taxreform #1031exchange #realestate #realestateinvesting #commercialrealestate #investing #congress

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“'The hedge-fund guys are getting away with murder,' Trump told CBS News in 2015. 'They’re paying nothing, and it’s ridiculous.'"

"The GOP tax plan, on the other hand, would offer hedge-fund managers more tax relief. Under that proposal, rather than paying the reduced capital-gains tax on their carried interest, they would not pay any taxes on their income from foreign clients. Instead, they could claim all of their income from foreign customers as fees, making their services tax-free exports, Rosenthal said."

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"Three-quarters of the tax cuts would benefit the top 1 percent of taxpayers and the highest-income taxpayers (0.1 percent of the population, or those with incomes over $3.7 million in 2015 dollars) would experience an average tax cut of about $1.3 million, 16.9 percent of after-tax income."

Stop saying the 1031 exchange is 100 years old—it's just good tax policy

By introducing arguments for the 1031 with reference to the fact that the policy is 100 years old, an utterly moot discussion point is introduced. It sets up critics to attack the policy as “outdated”, “obsolete”, and “arcane”. The age of a policy, however, is irrelevant to whether or not it ought to be kept. The point of reform is to put everything on the table.

Those interested in the 1031 exchange should focus on whether it meets the criteria for good tax policy, and keep remarks as lean as possible.

• Is the 1031 exchange fair? Yes.
• Does it raise revenue in the long-run? Yes.
• Does it stimulate the economy? Yes.

Proponents of the 1031 exchange have significant and powerful arguments on their side and several independent economic analyses that indicate that a repeal of section 1031 would have a devastating effect on the American economy. It is a shame when critics, and policy analysts, doing their best to remain unbiased, fail to sufficiently engage with this material. Mentioning that the 1031 exchange is 100 years old only provides the perfect excuse not to.

#savethe1031 #save1031 #taxreform #congress #1031exchange #realestate #investing #realestateinvesting #commercialrealestate #wealthmanagement

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"The study found Section 1031 to be key in stabilizing rents, safeguarding property values, and strengthening the economy."

"...creates jobs for contractors, appraisers, electricians, plumbers, roofers, landscapers, and others."

"...overturning Section 1031 would result in a hit of between $60 billion and $131 billion to the economy over ten years, in terms of the tax revenue and income that would be lost..."

"...would mean a huge loss of labor income, much of which would hurt lower-income earners. Lastly, investors might send their capital abroad, driving resources out of the United States..."

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"Exchanges also are used to further environmental protection objectives, such as through swaps involving conservation easements to preserve habitat and prevent future development."

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"Exchanges have been on the books as a part of the Internal Revenue Code in one form or another since 1921. The two primary purposes of the tax law were: 1) to avoid unfair taxation of ongoing investments in property, and 2) to encourage active reinvestment. These purposes are even more relevant today in our global economy than they were in 1921. Section 1031 not only permits efficient use of capital to preserve and manage cash flow, it also encourages U.S. businesses to reinvest in their domestic operations, rather than offshoring business activity."

"...1031 exchanges do stimulate more tax revenue while keeping the real estate market flowing. For example, if you sell an industrial building for $3M and exchange it for an office property that is $4M, two tax increases occur: 1) you will pay higher property taxes at the local level, and 2) hopefully the new property generates more cash flow than the previous property, which means you end up paying more ordinary income tax. Exchanges are win-win for the investor and the government. The investor gets to preserve their wealth by not immediately paying federal capital gains tax, state ordinary income tax, depreciation recapture and potentially a Healthcare surtax, while the government captures higher property taxes and more income tax."

#1031exchange #taxreform #realestate
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