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Commercial investors could potentially lose a critical tax-deferral vehicle based on pending budget legislation in Congress.
(PRWEB) July 02, 2014
Investors in commercial real estate could lose one of their most beneficial tax deferral vehicles if the current shift to tamper with the current tax code is left unchecked, comments Kevin M. Levine, Executive Vice President of Peak 1031 Exchange Inc. (http://www.peakexchange.com). Many seasoned players who invest heavily in income-producing properties count on the 1031 exchange process to mitigate tax liabilities. Several pending pieces of legislation could have a serious effect on investors who have benefited from the advantages offered through 1031 Exchanges. But as the need for increased tax revenue is required in Washington, these deals are under very serious threat. There may be trouble brewing in Washington as components of the 2015 fiscal budget begin to surface, Levine warns.
Real estate investors have utilized this tool for over three decades to help increase sales and return on investment as well as broaden real estate portfolios. However, this could all change with the upcoming fiscal budget. Under the current budget as outlined by President Obama, there will be a cap on 1031 exchanges of $1 million per taxpayer per year. While smaller investors would be exempt, the ruling equates to a ban on investors of larger assets that drive commerce in commercial real estate. Tax-deferred benefits from the exchange of like-kind properties offer investors strong incentives to participate in the market, and these budget proposals present a huge concern for major players who acquire and improve assets with a specific exit strategy in mind. This is not the only threat investors face in the upcoming 1031 Exchange debate, according to Levine. Several other proposals from both sides of the aisle have emerged to eliminate exchanges entirely. Other variations of the assault on tax deferrals can be found in a draft bill in the works which would lengthen depreciation schedules.
While these proposals would not take effect until 2015 if passed, the debate has already begun that potentially affects thousands of real estate investors. Most recent IRS records tracking 1031 Exchange transactions from the 2010 tax year reveal that 158,299 individuals filed for 1031 exchanges, an increase of over 20,000 from the previous tax year. Levine warns that any tampering with the 1031 Exchange process could potentially eliminate investor contribution to the economy. Levine asserts that commercial asset transfers stimulate economic growth through increasing real estate value and creating jobs as a result of renovations and improvements on newly acquired properties.
With such stark changes on the horizon impacting the future of the 1031 Exchange process the Federation of Exchange Accommodators (FEA) is diligently working on the behalf of investors to confront these proposals. As a participating member of the FEA, Peak 1031 Exchange, Inc. is monitoring the progress of these budget proposals, and will keep its client base apprised of any new developments. Laws offering capital gains advantages have been and will always be an easy target for legislators at budget time, states Levine. Our position is that commercial real estate plays a vital role in our economy, and the advantages tax deferred strategies 1031 Exchanges affords investors is crucial to the sectors continuing contribution to economic growth.
Peak 1031 Exchange, Inc. is a leading national provider of tax-deferred 1031 exchange services, specializing in all like-kind transactions including Simultaneous, Delayed, Reverse, Improvement and Personal Property exchanges. It is part of the Peak Corporate Network (http://www.peakcorp.com), a brand representing a group of entities providing a comprehensive array of commercial and retail real estate services nationwide including mortgage lending, loan servicing, short sale services, foreclosure services, insurance, real estate brokerage and escrow services. Peak 1031 Exchange, Inc. does not provide legal or tax advice. Always consult your tax or legal advisor regarding your specific transaction.
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