UPDATE - November 16, 2017: House Republicans easily pass tax reform bill. The Senate Finance Committee also voted 14 to 12 to approve their version of the tax package late Thursday Night. This paves the way for the full Senate to consider the bill after Thanksgiving.
November 13, 2017: The Senate released a draft of its tax reform bill late last Thursday. This draft includes no proposed changes to 1031 exchanges of real property. It does, like the House bill, propose to repeal like-kind exchanges for personal property.
The Senate Finance Committee is scheduled to begin marking up the draft bill this afternoon while the House is expected to hold a floor vote later this week on its version of the bill.
November 3, 2017: The Republican tax reform proposal was released last Thursday and we are happy to announce there are no proposed changes to 1031 exchanges of real property! Real estate 1031 exchanges have proved to be an important part of the U.S. economy, especially for small to medium size businesses and real estate investors. This portion of the tax code allows tax-free exchanges of “like-kind” property and the deferral of capital gains.
While like-kind exchanges for real estate survived, the proposed plan would repeal like-kind exchanges for personal property. For 1031 exchange purposes, personal property does not mean property for personal gain, but rather property used for business, trade or investment. Current examples of exchangeable personal property are (but are not limited to) business assets, aircraft, artwork, coin collections, construction equipment, and fleets of autos or trucks. This could drastically affect some businesses who utilize the personal property exchange provision in Section 1031 to defer taxes on equipment, supplies or other intangible business assets.
While this is only the initial proposed plan, the perceived goal is to have the tax reform bill signed into law within the next 3 to 8 weeks. This would make modifications to Section 1031 effective January 1, 2018. We will continue to keep you updated through the process of this tax reform bill. Below you can read the full proposal.