Do they deserve the tax break? – Orange County Register


One of the benefits of our profession is to gain insight into future legislation at state and federal levels that could affect our lives.

As you can see, the commercial real estate lobby is very influential. Recall that the big push that took place in California last year to defeat Proposition 15 would have changed the way property taxes are calculated for commercial real estate.

Parliament is currently discussing the deferred exchange of national taxes obtained through Section 1031 of the Internal Revenue Code. The rewards of huge infrastructure plans have to come from somewhere and can target wealthy commercial real estate owners.

In short, tax deferral swaps allow commercial property owners to defer capital gains tax when selling income-generating property. Certain criteria and deadlines must be respected. Otherwise, if a sale occurs, approximately 50% of the capital gain will be consumed by federal and state tax collectors. Therefore, except in extreme cases, the motivation to sell is lost.

David E, an attorney for Williams and Jensen. Franasiak, PLLC, First American Exchange Co. In a webinar hosted by Julie Baird, president of Biden, we discussed the Biden administration’s US family plan and ending a special tax deduction for real estate. Real estate investors defer taxation when trading real estate – for profits over $ 500,000. “

The maximum number of couples to be jointly submitted is $ 1 million, section 1031 is effectively deleted, and if the proposal becomes legal, it could be valid for transactions closed after December 2021.

I’d like to look at trading from another perspective: are they really important to those who don’t own commercial real estate? I’m sure I’m prejudiced – I’ll give you three easy-to-consider ideas.

There are quite a few employees in commercial real estate transactions. What is my premise? Eliminating transactions enticed by tax deferrals will also destroy all the work associated with these transactions.

I calculated once that 32 different people were involved in the purchase. Specifically, escrow agents, title agents, environmental surveyors, roofing inspectors, general contractors, general sub-contractors-air conditioners, electricians, plumbers, flooring. Not to mention professionals such as accountants, lawyers and wealth advisers. Browse through several brokers to complete the set. Dollars earned by those involved flow through the economy, groceries are purchased, rents are paid, and university funds are established. And state and federal income taxes are paid from their income.

Small business owners residing in commercial real estate through ownership grow their businesses using tax deferral swap mechanisms. Remember, business owners use IRS Section 1031 to purchase larger facilities and grow their business. Operational growth means purchasing equipment, hiring workers and creating taxable income.

The elimination of the tax-deferred exchange rate mechanism would generate $ 19.5 billion in 10 years with a stimulus package of $ 2.4 trillion. Unfortunately, the increments are so small that they look like rounding errors. Too often we lose sight of the unintended consequences of the actions we take.

For example, a subprime meltdown occurred when access to mortgages was expanded 20 years ago. Of course, there was a lot more to this story. But you get the idea.

Allen C. Buchanan is director of Orange Lee & Associates Commercial Real Estate Services. He can be contacted at [email protected] or 714.564.7104. His website is

Do they deserve the tax break? – Orange County Register Source link Are they worth the tax break? – Orange County Register

Source link

Leave A Reply

Your email address will not be published.