In a country looking to expand economic activity and generate growth, Section 1031 like-kind exchanges provide a helpful, fair, and valuable benefit to the private economy, writes John Harrison, director and CEO of ADISA. His op-ed, titled “$8 billion reasons to save key tax deferment from reform ax,” appeared in The Hill on August 18, 2017. Harrison writes that 1031 exchanges create construction activity and jobs in the real estate and other industries, benefiting the government and national economy.
Repeal of Section 1031 may bring immediate funds to the government, but would damage the national economy in the long-run, Harrison points out. He writes that repeal of like-kind exchanges would discourage business investment, cause longer holding periods for real estate, a decline of real estate prices, and a significant increase in rental prices–as much as 38 percent in highly-taxed markets. He cites the 2015 EY study on the potential repeal of Section 1031, “Economic Impact of Repealing Like Kind Exchange Rules,” and the 2015 study by Professors David C. Ling and Milena Petrova, “The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate.”
ADISA, or the Alternative Direct Investment and Securities Association, is the nation’s largest trade association representing the non-traded alternative investment space.
“Section 1031 is a fair and thoughtful means to maintain private sector investments, which results in significant economic stimiulus,” writes Harrison. With well-crafted tax reform, he writes, “we must not throw the baby out with the bathwater.”