Over the years IRC Section 1031 tax-deferred exchanges have been known by many names. In addition, there are many different types of exchanges that one way or another relate to Internal Revenue Code Section 1031. Let’s take a look at some of these names and transaction types.
Rarely do the interests of small businesses owners and a broad range of local entrepreneurs agree with almost a century of federal income tax policy – especially when it results in billions of dollars in taxes being paid.
The new tax bill unveiled today by House Republicans proposes to repeal like-kind exchanges for personal property. In its place, the bill provides for 100% expensing of property, however this provision is only temporary, sun-setting after five years. 100% expensing may be extended, as other unrelated provisions have in the past, but the uncertainty makes long-term planning difficult for businesses.
With so many weather-related natural disasters occurring with seemingly increasing frequency, let’s take a look at how such disasters affect persons seeking to complete exchange transactions. While the safe harbor timelines for conventional forward exchanges and for reverse exchanges are strictly enforced, there is some relief afforded in the event of a federally declared disaster in the form of time granted. The applicability of a particular federally declared disaster can be found on the IRS website, which provides news releases covering disaster events.
United States tax code sections 1031 and 1033 are sometimes confused by taxpayers as they are similar, not only in section number, but in that they were both created to provide for tax deferral of depreciation recapture and capital gains on the sale of property, but that's where their similarity ends. Sections 1031 and 1033 differ materially in:
Last week we heard a chorus of voices from around the web urging the preservation of like-kind exchanges in any forthcoming tax reform. Graniterock CFO Steve Snodgrass characterized the unprecedented cross-industry support this way: "Rarely do the interests of small businesses owners, construction equipment intensive businesses and a broad range of local entrepreneurs agree with almost a century of federal income tax policy — especially when it results in billions of dollars in taxes being paid. But fortunately for the economy, they do."
The 1991 Treasury Department regulations set forth detailed guidelines for tax deferred exchanges of real property and personal property. Prior to that time, exchanges could be done but very little guidance was available to make sure they were done correctly. This set of rules and regulations covered like-kind exchanges of both real and personal property. However, these two types of exchange property are not covered the same way. Below, I’ll summarize some of the differences between real property and personal property exchanges.
It is unclear where like-kind exchanges stand in forthcoming tax reform, but any tax plan that attempts to replace like-kind exchanges with immediate-expensing would create a big gap for taxpayers significantly invested in land assets since the immediate-expensing provision in the House Republican tax reform blueprint doesn't apply to land. This Bloomberg BNA Daily Tax Report from June 1, 2017 examines the particular plight of farmers in this scenario, for whom such a plan would be disastrous.
In mid-May, Ritchie Bros. received unconditional antitrust clearance from the U.S. Department of Justice for its acquisition of online auctioneer, IronPlanet. Ritchie Bros.' acquisition of IronPlanet will officially close in the coming weeks, further diversifying the channels through which customers buy and sell equipment. According to Jim Barr, Ritchie Bros. group president of emerging businesses, brand innovation and technology, the company has shifted strategically in the past few years from auction to multichannel asset disposition, and the IronPlanet acquisition was the next logical step in that strategy. “Each company has a great set of solutions," Jim Barr told Construction Equipment Guide. “We won't be getting rid of any of them. We want our customers to choose whatever solution best suits their needs.”