After encountering fierce opposition to plans to eliminate popular commercial real estate tax benefits last year, the Biden Administration has taken another approach and simply placed the measure into the White House’s new budget proposal.
In addition to rolling back the popular 1031 exchange, the actions also target several other deductions and processes.
Congress had initially removed 1031 exchange revisions from the budget. The Administration put them back in.
1031 exchanges are one of 10 deductions the Administration is branding as “tax loopholes” and is seeking to close.
Industry experts cite the positive impact the deferred capital gains under 1031 exchanges have brought to the overall economy and to construction and development. If the changes are enacted as proposed, deals may begin experience a drop-off as early as June, since part of the revision imposes a 180-day rule for completion before rates change. Experts predict potentially dire consequences for deals in the second half of the year as a result.
The experts note it is impossible to predict, at present, if the measures will pass the Congress, given thin margins of Democratic control, previous opposition and the general aversion to risk in a mid-term election year. (Source)