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I got this from our local CA Apartment Association that we’re affiliated with. Looks like CA would like to get more taxes by eliminating the 1031 exchange.
– dan
Assembly Bill 2640, authored by Juan Arambula (D-Fresno) would eliminate a property owner or company?s ability to use 1031 like-kind exchanges (LKEs). LKEs allow property owners to sell an asset and defer realization of any gain (and, therefore, the associated tax) when the proceeds of the sale are used to purchase an asset of similar type. In order for the transaction to qualify as a LKE, the assets (properties) must be structured as an exchange and the exchanged assets must be of a similar classification and must be used in a trade or business.
LKEs have been a part of the tax code since 1921 and the provisions have been strengthened and expanded on multiple occasions. They exist to promote healthy business activity and are especially powerful tools for small and medium-sized companies. One of the primary reasons that 1031 exchanges have been so unanimously agreed upon is that they?re constructed to promote reinvestment. Eliminating LKEs will restrict useful business tools for property owners and companies.
CAA is asking the author for amendments that remove the 1031 provision.
I heard there’s a proposal to charge sellers 3% sales tax on 1031 exchanges in California too.
Either one is bad.
California’s government is so broke that they will be digging deep for creative ways to make money on YOUR deals.
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