The Biden administration’s proposed tax plan contemplates limiting the application of section 1031 to exchanges with gains that do not exceed $500,000. Such a restriction would seriously curtail the use of section 1031 and would likely have debilitating effects on real estate markets.
The article linked below demonstrates the important role section 1031 plays in the real estate life cycle. It shows how section 1031 helps free property for its highest and best use and allows property owners to develop specialized skills and efficiently provide real estate to end users. The article also illustrates how modern joint ventures aggregate capital from various sectors of the economy and provide investment opportunities to a broad swath of the population who benefit from section 1031.
Despite the virtues of section 1031 and its integral role in the economy, it often appears as a candidate for repeal or limitation. Nonetheless, we hope it will be around for many years filling its vital role in the economy.