Article compliments of Matt Cholewa, Colonial 1031 Exchange Services, LLC, reach him at (203) 848-8606, or call Frederick P. Petrella, CCIM, CT Realty Group, LLC for possible exchange properties;
According to a recent Ernst and Young Study, The Economic Impact of Repealing Like-Kind Exchange Rules, the study finds that repeal of Section 1031 results in less federal revenue, shrinks the economy by $8.1 billion, discourages investment, negatively impacts the overall economy with an unfair concentration in certain industries, burdens certain businesses and taxpayers and is at cross-purposes with the goals of tax reform. The analysis finds that repeal of the like-kind exchange rules would increase the cost of capital in the economy, even when combined with lower tax rates. The higher cost of capital is found to discourage business investment which adversely affects the overall economy.
Repealing Section 1031 would subject businesses that rely on these rules to a higher tax burden on their transactions, resulting in longer holding periods, greater reliance on debt financing, and less productive deployment of capital in the economy. Many affected businesses are in pass-through form, which would not receive a benefit if the revenue from repeal of like-kind exchange rules is used to finance a lower corporate income tax rate. For an overview of this study, click on this link, Ernst and Young 1031 Exchange Study Overview.
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