“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “
In June 2016, while Americans were focused on the presidential election, a Republican task force unveiled a 35-page blueprint for tax reform. Dubbed “A Better Way,” the reform attempts to overhaul tax policy and to stimulate the economy through lower rates, reduced paperwork, job growth and tax incentives. Among the proposed changes, an almost century-old real estate investment tool, the 1031 exchange, faces elimination. Investors use 1031 exchanges as a way to defer the tax from any capital gains earned through the sale of a property, so long as the money is immediately used to purchase another asset. Swaps can be between various real property types, like land or multifamily buildings, or can include things like machinery, equipment or vehicles, and tax remains deferred until the property is sold with no reinvestment. Eliminating 1031 exchanges is not a new idea. In 2014, Congress’ Joint Committee on Taxation estimated a tax-revenue gain of $40B over 10 years by repealing Section 1031. President Barack Obama later proposed a $1M cap of gain deferral under these exchanges, and suggested removing collectibles, artwork and personal property as allowable property types. The Republican blueprint offers no direct mention of like-kind exchanges. In its place, the plan allows for investors to immediately expense new business and investment assets, including buildings, but not land. Rather than wait for the full depreciation of the property over 27.5 to 39 years, they can write off the full value after the first year. Proponents of immediate expensing argue that investors can offset the taxes due to gain and recapture on the first property by immediately writing off the improvements on the new property, creating an indefinite tax loss that would roll forward, similar to a 1031 exchange. Immediate expensing cannot fully replace 1031 exchanges, according to Fidelity National Title Insurance executive vice president and IPX1031 president John Wunderlich. Unlike the former, it does not take land value into consideration. This not only reduces investment opportunities for agriculture and ranching, where land value is 90% of the investment value, but also forces property owners to constantly trade up to avoid losing any of their profit to recapture and capital gains taxes. When it comes time to sell properties close in value, the taxes would likely wipe out any profits from the appreciation in value.
Timing also comes into play. When the sale and replacement purchase bridge two tax years, investors will have to pay all of the taxes in year one — the year of the sale — and will have less money to reinvest in year two. There is no proposal for a carry back of the expensing loss obtained in year two, the year of the purchase. Wunderlich predicts a chilling effect as a result of investors being unwilling to reinvest in other properties without the cushion of Section 1031. “Investors will be locked into their investments because of recapture taxes,” Wunderlich said. “They will hold onto their properties longer rather than face the negative tax consequences.” A Republican-controlled House and Senate have pushed this plan closer to fruition, but not without opposition. Over 100 real estate, agricultural and equipment associations have spoken out in favor of Section 1031. Members of the IPX1031 team, who represent Fidelity National’s tax-deferred exchange business, have met with Congressional leaders like Speaker Paul Ryan to find a better solution for the new tax policy. “Congress is trying to reorganize the U.S. economy, and that is a tall order,” Wunderlich said. “It may be too big of an issue to deal with all at once.” Individuals can also voice their concern. Head to the IPX1031 website to send an email to local congressmen and senators. To learn more about this Bisnow content partner, click here.
- Are you ready to sell or purchase your Land or Commercial Building in Phoenix, Scottsdale, Maricopa County and Pinal County, Arizona, please call me.http://walter-unger.com/are-you-ready-to-sell-or-purchase-your-land-or-commercial-building-in-phoenix-scottsdale-maricopa-county-and-pinal-county-arizona-please-call-me/
- FROM ME:
- Phoenix Commercial Real Estate and Investment Real Estate: Investors and Owner / Users need to really know the market today before making a move in owner user Commercial Properties, Investment Properties and land in Phoenix / Maricopa County, Pinal County / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties. I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( ccim.com) I have access to marketing not only in the United States, but also internationalClick here to find out what is a CCIM: https://en.wikipedia.org/wiki/CCIM
- WEEKLY LAND CLOSING UPDATE / THROUGH April 14, 2017 / Phoenix Arizona Metro, Maricopa County, Pinal County.
- DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
- The average age of the population is 34 years old.
- The health cost index score in this area is 102.1. (100 = national average)
- Here are some of the distributions of commute times for the area: <15 min (22.7%), 15-29 min (36.8%), 30-44 min (25.1%), 45-59 min (8.6%), >60 min (6.8%).
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
Kasten Long Commercial Group tracks all advertised apartment communities, including those advertised by other brokerages. The interactive map shows the location of each community (10+ units) and each location is color coded by the size (number of total units).
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail firstname.lastname@example.org or call me on my cell 520-975-5207
Walter Unger CCIM
Senior Associate Broker
Kasten Long Commercial Group
5110 N 40th Street, Suite 110
Phoenix , AZ 85018
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The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.