12A — March 13 - 26, 2015 — M id A tlantic
Real Estate Journal
www.marejournal.com
1031 E xchange
here are a lot of ques- tions in the air about the IRS Section 1031 By John Harrison, Alternative & Direct Investment Securities Association (ADISA) Interest in 1031 is growing! T
Section 1031 has been in the US tax code for almost a hun- dred years as a way to spur con- tinual update and replacement of equipment and property. Sell your old property, buy a like- kind replacement and defer the taxes on the gain. If the provi- sion were gone, we would miss a great stimulus to buy replace- ment equipment or to buy new real estate. Folks would simply sit on the land, buildings, and equipment longer to avoid a sudden large tax bill on the gain. This would decrease the overall GDP. And, by the way, this is not some gimmick; the
tions •1031 Exchange Tax Update and Analysis Tracking •1031 Exchange Strategies and Replacement Property •1031 Exchange and Master Leases – the Do’s and Don’ts •Energy 1031: An Oxymo- ron? Not So Fast •1031 Exchange: Asking the Right Quetsions and Client Suitability I mention these here not so much to plug the conference (that would be shameless), but to show the level of interest and the depth of the topic. At this major alternative investment
industry event of more than 50 educational sessions which cover every aspect of alterna- tives, about 12% of the action surrounds 1031s. This topic is big, and those in real estate and other financial advisors are waking up to its value. According to the upcoming Ernst & Young study, the real estate and rental and leasing industries account for approxi- mately 50% of the fair market value of property received in like-kind exchanges, most of it in commercial and industrial real estate. Furthermore, al- most 15% of non-residential real estate property (in terms of capital stock) is connected to like-kind exchanges. And that’s just the real estate side, several other industries like equip- ment leasing, rental cars, and trucking use 1031 exchanges to aid their growth. Plus, 1031 exchanges only apply to US property, so the advantages stay right here at home. ADISA is proud to boast on the 1031 exchange professionals as one of the most important seg- ments we cover. We hope this well-designed tax treatment is around for another 100 years or more, and we hope you are involved in it too! John Harrison is the ex- ecutive director/CEO of the Alternative &Direct Invest- ment Securities Association (ADISA). n a section of the MARE Journal P.O. Box 26, Accord, MA 02018 781-871-5298 • 800-584-1062 fax 781-871-5299 www.marejournal.com Publisher/CEO Linda Christman lchristman@marejournal.com Section Publisher Steve Kelley Skelley@marejournal.com Section Editor Julie King editor@marejournal.com Financial Digest
tax eventually gets paid when the replacement asset is sold, or incrementally as the depre- ciation is foregone, or when an estate is settled. This Spring Ernst & Young will release a study of how much 1031s mean to the econ- omy. ADISA is proud to be in- volved in the study along with many of our sister associations. In our upcoming conference, ADISA’s Spring Symposium, we have a number of sessions featuring the best minds out there on the 1031 Like-Kind exchange: •1031 Exchange Founda-
L i k e - K i n d exchanges , and I’m just ba c k f r om s e v e r a l meetings in DC with our coalition of associations p r o v i d i ng
John Harrison
answers to Congress on the great merits of the feature. The interest is growing, and we are starting to see how much the 1031s help our economy.
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