The Biden administration is asking for a massive change to the way Section 1031 operates that could threaten the commercial property market.
Back in 2017, the Tax Cuts & Jobs Act (TJCA) made a big change to Section 1031, which allows taxpayers to put off recognition of capital gains and associated federal income tax liability. The change meant that Section 1031 could be applied only to exchanges of real property that were being held for productive use in a trade or business or for investment, or those that were not held primarily for sale.
When the pandemic forced many professionals into home offices during the first half of the year, it seemed like a temporary solution. As the virus has raged on, however, companies are figuring out that decentralization could lead to a better bottom line — and that leaves those of us working from home with an opportunity for a tax break.
In normal times, a 1031 tax deferred exchange must be concluded within 180 days — but these aren’t normal times. The IRS has just extended both the 45-day identification period and the 180-day exchange period from April 1, 2020, to July 15, 2020.