"Like-kind exchanges stimulate economic growth," according to Brown. "Repealing or curbing the applicability of Section 1031 would critically injure businesses, investors and the real estate market which is just now showing signs of getting back on its feet." Brown is quick to point out that Section 1031 is not a tax dodge. Section 1031 allows investors to generate additional equity so long as the investment stays in place. Capital gains taxes become due whenever taxpayers don't use all of the funds received from a sale or ultimately "cash out" of their property.Tax reform efforts are underway in both the House and the Senate. While Congress is not expected to enact reform legislation in the immediate future, decisions made in the coming weeks and months on issues, such as Section 1031, will be extremely difficult to reverse in the endgame of reform legislation. The Federation of Exchange Accommodators (FEA) has worked diligently to educate Members of Congress and other policymakers on the importance of Section 1031. These efforts could be undone, however, as higher profile issues consume the attention of the House and Senate tax-writing committees.
Section 1031 Like-Kind Exchanges Serve As Vital Stimulant For Economic Growth
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