This could be devastating to the commercial real estate market
[{"id": "gwa6yuc", "text": "People need to learn Biden's negotiating style before they go freaking out. He's a long-time Senator that loves the negotiations and debates.  He is starting high and expects to meet somewhere in the middle not to mention the fact they are targeting wealthy investors.\n\n\"Smaller-scale investors won\u2019t be hit by the changes since the provision, sometimes referred to as a 1031 exchange because of its tax code designation, would continue to be allowed for proceeds below $500,000.\"", "replies": [{"id": "gwah8j7", "text": "With the increase in money supply 500k is gonna be REAL easy to exceed.", "replies": [{"id": "gwaklnc", "text": "500k proceeds? Even with current loans that doesn't include most \"smaller-scale investors.\"", "replies": [{"id": "gwao8ae", "text": "I consider my self smaller scale - I might be convinced to support some sort of deal where there was a marginal increase based on the scale 0-2m would continue 2-5m would pay 50% of the increased capital gains and 5-10 would pay 75% anything over that pays the full increased capital gains. BUT I would need to look at the full tax proposal before I tossed in my support for that.", "replies": [{"id": "gwb2ssx", "text": "Yeah it definitely depends on the actual proposal. But I think it's too easy to just lump everyone into \"small-scale\" or not,  because you might be well below the industrial guys but if clearing $500k profits is easy you're not tiny either. I may be biased from dealing with more residential than commercial investing though", "replies": [{"id": "gwd5kic", "text": "Yeah a small commercial deal is larger than any single family deal (typically)", "replies": [{"id": "gwevow9", "text": "Hopefully it's gradiated, so even if it's $500k the tax is only on the amount above that, and then taxed by bracket depending on how much over you go (only taxing the part above each bracket for that amount). Like how estate tax is handled", "replies": [{"id": "gwf6g1j", "text": "This makes too much sense, it will be all or nothing because \u201ceat the rich\u201d", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "gwb8ztd", "text": "Unfortunately this is probably the best idea but makes way too much sense to fly in Washington. It would help the little man too much and not the real estate funds and REITs that are buying massive development and apartment complexes", "replies": [], "depth": 5}], "depth": 4}, {"id": "gwat0n5", "text": "Problem is that threshold will start pushing large investors into SFH purchases to avoid the loss of 1031. That will have a MASSIVE impact on small investors. As always with the government, they either are blind to unintended consequences or the unintended consequences is what they are lobbied for.", "replies": [], "depth": 4}, {"id": "gwfla7u", "text": "Yes it does include most small scale investors. To make a living wage as a professional landlord in residential, you probably need around 5-10 units at minimum to make at most $70-100k/year. The small scale investor relies on mortgages and equity to build that up overtime. $500k is minuscule in this context", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gwahrpt", "text": "I mean it\u2019s never going to happen, he\u2019s just negotiating. Same with cap gains at marginal tax rate. If you don\u2019t start from your reach position you\u2019ll never get to where you want to actually end up.", "replies": [{"id": "gwannwv", "text": "He is only pushing for a federal capital gains tax rate of 39.6% above LTCG above $1 million.  He is not proposing to match capital gains tax rates to ordinary income tax rates.", "replies": [{"id": "gwar05a", "text": "Either way he isn\u2019t getting anywhere close to that....", "replies": [{"id": "gwarodt", "text": "You don\u2019t think so?  That almost exclusively is a tax on C-suite executives who get paid primarily in RSUs.", "replies": [{"id": "gway2f3", "text": "No way it gets passed, it\u2019s posturing. The people who pay the lobbyists and fund raise for elected officials are the ones who will get whacked, no flipping way they let it go that high. I think it ends up going to high 20s, I\u2019ve heard from a few people target is 28.5", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gwainob", "text": "If this means I'll stop getting monthly calls from 1031 boiler rooms after a brokerage sold my info last year (looking at you M&amp;M), that'd be great.\n\nI think \"devastating\" is a bit of a reach, but it would certainly impact some areas (STNL) more than others. I'd argue that class, or at least the volume of individual investors seeking to flip into them, will decline anyway. IMO it increased recently due to bit of a demographic phenomena as baby boomers hit retirement.\n\nI suspect that instead of an outright deletion of the 1031 section we'll see a reduction in benefit. I think it'd be reasonable if it was more like the QOZ code, with a deferral and reduction of capital gains. \n\nWhat would be great policy is if at the same time they extended the identification period. Presumably the policy objective is to keep liquidity in the market and reduce transaction costs to the economically efficient redeployment of capital. However, tight identification deadlines lead to inefficient redeployment as tax-mitigation becomes the primary strategy instead of \"best deal\". \n\nMore specifically, I would like to see the timeline for improvement exchanges lengthened. It is near impossible to do one in a six month window. Again I really like the QOZ concept of \"you must improve this\". If you want someone to create value with cap gains with tax deferral as an incentive, they need 2-3 years to complete the improvements.", "replies": [{"id": "gwao43p", "text": "The real change I want to see is specifically requiring businesses/people to opt-in to the sale of information.", "replies": [], "depth": 2}, {"id": "gwar6ks", "text": "It will also have a significant impact on open ended funds - they trade REIT held assets via 1031 as well... it\u2019s not just individuals it\u2019s the institutional asset managers who get whacked as well", "replies": [], "depth": 2}, {"id": "gwb4nrz", "text": "The big problem with the QOZ provisions is that they are designed for syndicated funds rather than for individual taxpayers.", "replies": [{"id": "gwd6ghl", "text": "Agree, I am attempting one with some contorted partnership and am paying more than I would like to a CPA that specializes in QOF to attempt to remain compliant. There are several reasons a QOF was very attractive to me over a 1031 but it is definitely not for the average investor.", "replies": [{"id": "gwdn4g8", "text": "Lol I didn't realize who I was replying to.\n\nI'll link [your comment writing up your QOF headaches](https://www.reddit.com/r/realestateinvesting/comments/lxy39m/creating_a_small_scale_opportunity_fund_to_buy/gppn6gl/) here in case anyone else seeing this comment chain is interested in it.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gwans6j", "text": "Does anybody have data on the total volume of 1031 transactions as a percentage of total sales over the past couple years?", "replies": [{"id": "gwcgqvb", "text": "I\u2019d be curious as well. I imagine it\u2019s at least 20%, which would make a big impact.", "replies": [], "depth": 2}, {"id": "gwg26ci", "text": "Check out CoStar. They have this data and more in droves.", "replies": [{"id": "gwg4k6w", "text": "I don\u2019t have access to costar in my current role? If you have the answer can you share it?", "replies": [], "depth": 3}], "depth": 2}, {"id": "gwqa5m8", "text": "I have seen a study that estimate it at around 6% of total volume.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gwb0jw2", "text": "I doubt it happens, and I'm sure this is an unpopular opinion here but bring it!  The musical chairs from that will pay for a vacation house for some of us lol. I understand the policy objective to increase liquidity but between 1031 &amp; step up in basis it kind of is crap that needs fixed.", "replies": [{"id": "gwb5m0c", "text": "Replace the inheritance tax with deemed disposition at death, or do an AMT style system where the estate pays tax on unrealized gains or the inheritance tax, whichever is more.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gwb49m9", "text": "You need to be earning more than 1/2 of $1 million in games before the a proposal does anything. \n\nThat\u2019s 10% on a $5 million property. So you need to earn more than 10% in gains before the proposal applies", "replies": [], "depth": 1}, {"id": "gwc644d", "text": "I\u2019m sure he has at least one economist advising him, and if he does, you can be sure it won\u2019t happen. Indeed, if there is one thing we all agree on is that getting rid of 1031 would have a net negative effect on the state\u2019s total revenues.", "replies": [], "depth": 1}, {"id": "gwe0yrn", "text": "All great points. Can\u2019t speak for other states but I\u2019m sure localities in California would be against this too. Lots of properties that have been owned for decades and thus taxed way below market value are only ever traded (and thus property taxes brought up to market value) because of the 1031 exchange option. \n\nI don\u2019t see it passing. Like someone else said, it\u2019s a negotiating tactic. And I don\u2019t think it\u2019s going to be devastating for the CRE market. It just means less inventory.", "replies": [], "depth": 1}, {"id": "gwesa04", "text": "Save 1031: Oppose Proposals to Eliminate or Limit 1031 Exchanges\n\n[Tell Congress to Keep 1031 Exchanges ](https://take-action.ipx1031.com/ctas/send-message-to-congress?inf_contact_key=0b4a28b63638fee6434a6b4cf144c560801195387ba98c7f473ffe7a3ca49389)", "replies": [], "depth": 1}]