1031 Exchanges and Tax Reform
What's In, What's Not
Since 2013 when former chair of the Senate Finance Committee, Max Baucus, talked about a possible tax plan that would significantly change 1031 to the Dave Camp tax bill introduced in 2014 that included a full repeal of Section 1031, 1031 CORP. and our industry colleagues have worried about the future of like-kind exchanges. Over the last few years, there have been countless Calls to Action to you and others who understand the importance of Section 1031 and hundreds of visits on Capitol Hill and in-district by 1031 practitioners, including many members of our 1031 CORP. team.
When the Tax Cuts and Jobs (the "ACT") was signed into law by President Donald Trump on December 22, 2017, many 1031 practitioners breathed a sigh of relief but Section 1031 did not go unscathed. Real property exchanges were preserved. Real property includes everything from a single family rental property to a farm to conservation easements to an office building to oil and gas royalties. You can continue to sell more than one or acquire more than one. Unfortunately, personal property exchanges were repealed from Section 1031. This would include tangible and intangible personal property assets  used for a trade or business, such as equipment, vehicle fleets, airplanes, livestock and furniture. These personal property assets may now be eligible for immediate expensing. The replacement asset can be new or used and must have been placed in service after September 27, 2017.
Tax Reform and its Impact on Real Estate
A Big Win for Commercial
Real Estate Owners

The Tax Cuts and Jobs Act (the "ACT") is considered the single most significant tax legislation since the Tax Reform Act of 1986. The 500+ page Act signed into law by President Trump on December 22, 2017, is anticipated to reform the tax code significantly both for individuals and businesses. Whether you own residential or commercial real estate, are in a partnership or part of a corporation, you will likely feel its effects sooner or later. Provided is a brief overview of the Act and how it will affect real estate owners and investors.
PA Closer to Recognizing 1031s
Bill Passes House; Moves to Senate

Section 1031 allows you to defer federal gain through like-kind exchanges. Every state that has an income tax regime either follows the federal code or has its own version of 1031 except the Commonwealth of Pennsylvania. The failure to recognize a 1031 exchange puts Pennsylvania at a disadvantage as we compete for new real estate investors and business owners. To add insult to injury, exchangers cannot use any of the sale proceeds to pay the Pennsylvania income tax without having to pay capital gains on the amount not reinvested in like-kind replacement property. Currently, all Pennsylvania residents owe the tax on their gain regardless of where the property is located and all non-residents selling property in Pennsylvania owe the tax. Legislation to recognize 1031 exchanges is working its way through Harrisburg. The Pennsylvania House of Representatives recently approved House Bill 331 (Bloom, R-Cumberland) which would allow 1031 exchanges in Pennsylvania. A companion bill in the Senate, SB 201 (Folmer, R-Lebanon), has passed and is currently in the Finance Committee. If signed into law, the legislation would amend the Pennsylvania tax code to apply Section 1031 of the Internal Revenue Code.
1031 CORP. will continue to keep you posted.
Trending this Month . . .
Flipping Properties     
Can I use Section 1031?
While the real estate market continues to heat up, so are the number of "flippers" turning over properties.  Our 1031 CORP. Exchange Team is getting many calls lately about the applicability of Section 1031 when flipping houses.  Flipping usually entails a property that is purchased, quickly renovated and sold for a significant profit.  The properties are not usually held for more than a couple of months.  As these properties are not held long-term and were acquired with the intention of turning them over quickly, they do not qualify for tax-deferral treatment under Section 1031.  Any property held for sale (spec homes, building lots, model homes, flips, etc.) are ineligible and the profit will be taxed as ordinary income.  While Section 1031 doesn't include a specific holding period, the property does have to be held for the productive use in a trade or business or for investment.  More important than the length of time a property is held is the picture painted through your use of the property (how it is reported to your lender, to the insurance carrier, on your tax return, was it listed for lease or for sale, etc.).  Learn More

Wealth Building Webinars
Join us for our complimentary Wealth Building Webinar Series designed to help you build and preserve wealth.
Register Today!

Tuesday, May 15, 2018 12:00 PM ET

Thursday, May 17, 2018 12:00 PM ET
Sanna Phinney Officially Retires
Realizes Dream of Living in France

1031 CORP. recently announced the official retirement of Sanna Phinney, CES ®, from our Bend, Oregon branch office. Sanna joined the 1031 CORP. Exchange Team on April 22, 2014 when the assets of 1031 Asset Exchange, the exchange facilitator company founded by Sanna in 2003, were acquired by 1031 CORP. Sanna and our Margo McDonnell served together on the Certified Exchange Specialist ® Certification Council and have been industry friends for many years.

Prior to joining 1031 CORP., Sanna developed a long-term plan to retire in 2017 and relocate to the South of France with her husband, Chuck. Finding another exchange company to partner with and assembling a great local team to continue to provide exceptional service to her long-time exchange clients and contacts was her top priority. With the addition of each new exchange professional, Sanna was able to step further away from the day to day operations.

In January 2016, Sanna handpicked Danielle Brock to take over management of the Bend office. Phinney had worked with Danielle in the past and knew she would be the perfect fit. In June 2016, Emily Carty joined the team and is now serving as an Exchange Officer. The team was rounded off with the addition of Kristal Cozine as an Exchange Coordinator in September 2017.

In November, Sanna and Chuck realized their dream and relocated to Limbrassac, France and we wish her nothing but the best. Of course, our Exchange Team still occasionally interrupts her adventures to tap her 1031 expertise and seek her opinion on various exchange situations and business issues.
Message from our President

Margo McDonnell
Dear Friends,
Happy Spring! With four months already in the rear view mirror, 1031 exchange activity remains steady. The economy is strong, unemployment is at a record low, property values are continuing to increase and mortgage rates are still very low although they are inching up. The challenge facing many would be Exchangers is the lack of inventory. The limited number of properties on the market is making it very difficult to find desirable replacement property and that has Exchangers waiting to put their relinquished property on the market until their replacement property is under contract with a seller. If you are contemplating an exchange, I encourage you to look for possible replacement property while your property is on the market. And while there is no requirement for your replacement property to be under contract when you identify it within the 45-Day Identification Period, I strongly encourage you to do just that. As you must acquire one of the properties identified in order to successfully complete your exchange, with properties selling so quickly, you have no guarantee you will be able to get the one you identified under contract. Our goal is always to keep the exchange as simple as possible and this will alleviate much of the stress.
Warm Regards,

About 1031 CORP.
Serving as a nationwide qualified intermediary for 1031 tax-deferred exchanges since 1991, 1031 CORP. strives to provide a superior exchange experience for our customers and their advisors. We provide our customers with enhanced security of funds, knowledgeable exchange professionals and a commitment to keep the exchange process simple for our customers and their advisors. Our Exchange Team, which includes Certified Exchange Specialists®, has the experience and expertise to facilitate even the most complex exchange transaction, including reverse and improvement exchanges.

Additional information can be found at www.1031CORP.com.
In This Issue

Margo McDonnell

Margo McDonnell, CRE, CES®
Certified Exchange Specialist®
President and CEO
1.800.828.1031 ext. 212
Mobile: 610.680.6896
Find me on Facebook
View my profile on LinkedIn

1031 CORP. Logo

Marissa LoCascio, CES ®
Senior Vice President &
Director of Operations
1.800.828.1031 ext. 210
Mobile: 610.742.4351

Find me on Facebook
View my profile on LinkedIn
Cindi Platt-Elliott
Pennsylvania Branch Manager
1.800.828.1031 ext. 216
Mobile: (610) 551-2033 

1031 CORP. Logo

Sue Umstead, CES ® 
Certified Exchange Specialist®
Senior Vice President
1.800.828.1031 ext. 208
Mobile: 610.755.8520

Find me on Facebook
View my profile on LinkedIn
Marilyn DeAngelis
Exchange Officer
1.800.828.1031 ext. 207
Mobile: 973.879.3846

1031 CORP. Logo

Not a Subscriber?  Interested in receiving our Exchanging Times newsletter each month? 

Join Our Mailing List


Follow 1031 CORP

"LIKE" 1031 CORP. on Facebook to receive a daily tidbit on 1031 exchanges and related topics.


 Find us on Facebook

View our profile on LinkedIn

Follow us on Twitter

Visit our blog

Visit Our eNewsletter Archive