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GOP Tax Plan & 1031 Exchanges

UPDATE - December 20, 2017: The House has voted for the second time across party lines and passed the largest tax overhaul in 30 years. With a 224-201 vote, Congress sent the package to Trump's desk in a huge victory for the Republican party. Again, there are no changes to 1031 exchanges of real property. The portion of the tax code that allows tax-free exchanges of “like-kind” property and the deferral of capital gains has remained intact.

December 20, 2017: The House is scheduled to re-vote later this morning after three provisions in the bill violated Senate rules. The Senate, however, has approved the final version early this morning with a vote of 51-48.

December 18, 2017: Republicans returned to Congress today as they aim to pass their tax plan as well work with Democrats on a budget deal before the end of Friday, avoiding a government shutdown. The GOP has made it clear their goal is to send President Trump's tax legislation before Christmas. They hope to hold votes early this week.

December 2, 2017: Early Saturday morning the Senate passed their version of the tax bill with a vote of 51-49. Besides one Republican (who was a no vote), all Republicans voted in favor, while all Democrats voted against the bill.

The next step is for the House and the Senate to reconcile the language in the competing bills through a conference committee, then they'll each vote on the final version. The hope is to have Trump sign the completed bill before the holiday break.

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.

Read Full Text: Description of the Chairman's Mark of the "Tax Cuts and Jobs Act"

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.

Read Full Text: Tax Cuts and Jobs Act
Read: Section-by-Section Summary

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