A Split Congress Could Bode Well for 1031s

As the wrangling over the Oval Office continues, there could be good news in the cards for 1031 like-kind exchange investors. And here’s why. Despite campaign promises to keep or alter 1031s, this isn’t a decision that will come from the White House alone. 

Rather, it’s a battle that will be waged in the chambers of Congress. And, given its split nature, as the voting stands now, 1031 investors stand to deal another day without change to their financial expectations.

For those playing at home, here is the Congressional play-by-play to date: With Alaska Senator Dan Sullivan’s re-election, a democratic senate becomes increasingly unlikely. Georgia is still in play. 

Now, back to what all of this means for us. As The Real Deal has reported, the democratic proposal has been to limit 1031s only to those making less than $400,000 a year. It’s all part of a strategy to roll back currently in-place tax cuts.

All of us know what the impact of a change in 1031s would mean, not just for the industry, but, as The Real Deal states, it would also amount to yet another blow for an already anemic economy. Indeed, 1031s have relevance for investments beyond commercial real estate, up to and including such trades as vacation homes.

But here’s a basic truth about politics and real estate. The latter has always been a scapegoat for economic troubles. (This makes the 1031 issue especially ironic since CRE was not the source of the current economic woes.) We have seen that pound of flesh taken with every promise to revise the tax code–with the exception of an administration run by a real estate guy. And we always ride the wave. If 1031s take the proposed hit, we’ll adjust according . . . even if we don’t like it.