CALL TO ACTION - CONGRESSIONAL LEGISLATIVE ACTIVITY CONCERNING 1031 EXCHANGES
 In recent months, there has been increasing "noise" about section 1031 in Washington, DC and we are asking you to help our national trade association, Federation of Exchange Accommodators (FEA), preserve the benefits of IRC Section 1031.
- Congressman Dave Camp, Chair of the Committee on Ways and Means of the U.S. House of Representatives, formed a bipartisan tax reform working group charged with the task of fact finding and information gathering about present law. Group members will be examining eleven subjects, one of which being real estate tax matters. Over the next several months, the members will engage in a process of soliciting stakeholder input for their group(s). Section 1031 of the Internal Revenue Code is on the table as a potential revenue raiser for tax reform. The FEA and its members have submitted comments to a number of the working groups.
- The Joint Committee on Taxation (JCT) recently released its estimates of federal tax expenditures for fiscal years 2012-2017. The report contains 5 year estimated costs for various categories as outlays in the federal budget. In this report, totals for each tax expenditure are presented for two 5 year periods covering fiscal years 2012-2016 and fiscal years 2013-2017. As always, the report estimates the expenditure for Section 1031. This year's report says the deferral of gain on like-kind exchanges will cost $42 billion over a 5 year period (2012-2016) which is much higher than previous estimates. The impact of this revised estimate is that Section 1031 like-kind exchanges are a significantly larger target as a potential revenue raiser for tax reform.
- The Center on Budget and Policy Priorities think tank released a report entitled "Tax Expenditure Reform: Essential Ingredient of Needed Deficit Reduction." The report may be found by clicking here. The report states "Policymakers also should close various tax breaks that allow wealthy people to pay much lower or no taxes on certain forms of income." In the context of Section 1031, the report states: "The like-kind exchange provision is a strong candidate for reforms to reign in its excesses or repeal it." The FEA Government Affairs Committee (GAC) is preparing a rebuttal to the report addressing its inaccuracies.
The FEA is in the process of approaching other industry groups with an interest in Section 1031 in order to create a coalition but we need your help, too.
We are issuing a CALL TO ACTION and asking you to contact members of the Senate Finance Committee, including Chairman Max Baucus and Ranking Member Orrin Hatch, and let them know you or your client have benefited from a 1031 exchange and the difference it made in the transaction. We encourage you to also reach out to your local Congressional leaders and tell them you do not want change to section 1031.
For a Sample Letter you can customize and send by email directly, click here.
For your reference and talking points, please review the FEA's whitepaper, "Impact of Section 1031 on the Economy."
Instructions for Sending Letters to the Senate Finance Committee
Email your letter to the Chief of Staff asking him to forward your letter to the Senator. Copy the Executive Assistant and the Senate Finance Committee Tax Counsel. Please send a separate email to each group.
For Chairman Max Baucus:
To: Chief of Staff Paul Wilkins
paul_wilkins@baucus.senate.gov
Cc: Executive Assistant Anthony Lopez
anthony_lopez@baucus.senate.gov
Cc: Senate Finance Committee Tax Counsel Holly Porter
Holly_Porter@finance.senate.gov
For Ranking Member Orrin Hatch:
To: Chief of Staff Michael Kennedy
michael_kennedy@hatch.senate.gov
Cc: Executive Assistant Ruth Montoya
ruth_montoya@hatch.senate.gov
Cc: Senate Finance Committee Tax Counsel Mark Prater
mark_prater@finance.senate.gov
Thanks to all of you for your efforts and support. We will keep you posted.
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Auctions Maybe the Winning Bid for You
It is no secret that there are a number of rules to follow in order to successfully complete a 1031 tax-deferred exchange. When relinquishing 1031 exchange property or acquiring replacement property thru an auction, it takes a little more planning but can certainly be accomplished. Whether you are effecting a real property exchange or one with tangible or intangible personal property held for business use or investment, 1031 CORP. can help you preserve your ability to exchange.
Many of the procedures for real property and personal property exchanges are the same so we will review them together.
While auctions do take more planning, 1031 CORP. has worked with a number of clients who have successfully sold and purchased 1031 property this way.
Learn More
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States Can Also Challenge a 1031
Could Trigger State Taxes, Penalties
One of the articles in last month's newsletter focused on the requirements of successfully exchanging a vacation home. That article also addressed Moore v. Commissioner, T.C. Memo (2007-134) which involved a taxpayer who never rented the relinquished or replacement property exchanged and whose exchange was ultimately disallowed. Whenever exchanging, taxpayers worry about meeting the requirements of IRC section 1031 with little or no thought to whether or not the state will allow the tax-deferral treatment.
Danielson v. Commissioner of Revenue, Minnesota Tax Court, (Mar. 1, 2013) involved a similar situation that was challenged by the MN Commissioner of Revenue. The Danielsons appealed and subsequently lost which resulted in tax on the gain they had hoped to defer as well as penalties for substantial understatement of taxes and deduction of rental expenses.
This is just another reminder of the importance of discussing your situation with a tax and/or legal advisor who is knowledgeable on section 1031.
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Our Apologies
In last month's newsletter we inadvertenly listed Marie LePera's name as Mary LePera. We're sorry Marie! In case you missed it, here is her update on the Brigantine area at the Jersey Shore.
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Join us for our complementary Wealth Building Webinar Series designed to help you build and preserve wealth.
Thursday, May 2, 2013 12:00 PM - 12:45 PM EST
1031 Exchanges Made Easy
Thursday, May 9, 2013 12:00 PM - 12:45 PM EST
Reverse & Improvement Exchanges: Preserving the Ability to Defer the Gain
Thursday, May 16, 2013 12:00 PM - 12:45 PM EST
Tax Consequences of Selling a Primary Residence
Thursday, May 23, 2013 12:00 PM - 12:45 PM EDT
1031 Exchanges as a Retirement and Estate Planning Tool
Thursday, May 30, 2013 12:00 PM - 12:45 PM EDT
1031 Guide for Real Estate Professionals
View Full Schedule and Register Now!
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Trending this Month...
Installment Sales and 1031 Exchanges
 We are seeing a number of Exchangers offering to provide financing to their buyers. While it means they may not be able to defer all of their gain through their 1031 exchange, they feel the ability to get a set rate of return on the note makes it a worthwhile strategy. Learn more about how 1031 exchanges can successfully work with an installment sale.
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Message from our President
 | | Margo McDonnell |
Dear Friends,
It's been a busy month but not for the reasons I want! As you can see from our CALL TO ACTION above, section 1031 seems to be on the hot seat with our Congressional leaders. There are even more examples of unwanted attention 1031 has received in the last nine months than mentioned and we have been busy writing our local Congressional leaders and members of Congressman Camp's working committees to let them know how 1031 exchanges not only benefit taxpayers but all local, state and federal governments. I encourage you to review the FEA's Impact of Section 1031 on the Economy. I think you will be surprised by how beneficial 1031 exchanges are.
You are on our mailing list because you have worked with us or have requested information on 1031 exchanges at some point in our 22 year history. I urge you to please send letters supporting 1031 to Sen. Baucus and Sen. Hatch as well as your local Congressional leaders. Feel free to use the sample letter but I encourage you to personalize your letter to let them know how 1031 made a difference in your transaction.
Your support is greatly appreciated! 1031 CORP. will continue to keep you posted.
Best Regards,
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About 1031 CORP.
Serving as a nationwide qualified intermediary for 1031 tax-deferred exchanges since 1991, 1031 CORP. strives to provide a superior exchange experience for our customers and their advisors. We provide our customers with enhanced security of funds, knowledgeable exchange professionals and a commitment to keep the exchange process simple for our customers and their advisors. Every member of the exchange team is a Certified Exchange Specialist® and has the experience and expertise to facilitate even the most complex exchange transaction, including reverse, improvement and personal property exchanges. Additional information can be found at www.1031CORP.com. |
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Margo McDonnell, CES®
Certified Exchange Specialist®
President
1.800.828.1031 ext. 212
Mobile: 610.680.6896
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Sue Umstead, CES®
Certified Exchange Specialist®
Senior Vice President
1.800.828.1031 ext. 208
Mobile: 610.755.8520
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Marissa LoCascio, CES®
Certified Exchange Specialist®
Senior Exchange Officer
1.800.828.1031 ext. 210
Mobile: 610.742.4351
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Richard Heller, Esq., CCIM, CES®
Consultant
1.800.734.1031
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Bettye J. Matthews, CPA
Consultant
1.800.680.1031
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Joseph F. Szajnecki, CES®
Consultant
1.800.734.1031 |
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2012 Exchange Reporting Guide
Download our 2012 Exchange Reporting Guide here for information on reporting your 1031 exchange, when to file your tax return, when to file for an extension and other important tax reporting assistance!
Helping to Simplify the Reporting of your 1031 Exchange!
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