President Biden's proposed cap on Section 1031 like-kind exchanges would drastically curtail economic activity and effectively cripple CRE markets, according to a new analysis by Ernst & Young using Federation of Exchange Accommodators data.

Section 1031 exchanges are predicted to add 568,000 jobs and $27.5 billion in labor income to the national economy and $55.3 billion to the US gross domestic product in 2021, according to the FEA. E&Y also says like-kind exchanges will generate approximately $7.8 billion in federal, state and local taxes this year. Foregone depreciation on replacement properties will generate $6 billion per year in income tax revenue.

The Biden Administration has proposed capping gains deferred under 1031 exchanges at $500,000 as a means of paying for the $1.8 trillion American Families Plan.

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