Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/897832
CCIM.COM November | December 2017 15 provide a vital stimulus to a multitude of economic sectors, hav- ing local, national, and global effect. It is evident that Section 1031 promotes capital formation and liquidity. A macroeconomic impact study by Ernst & Young and a microeconomic impact study on commercial real estate by David C. Ling, Ph.D., at University of Florida, and Milena Petrova, Ph.D., at Syracuse University, both published in 2015, concluded that Section 1031 removes the tax lock-in effect and permits taxpayers to make good business decisions without being impeded by negative tax consequences. Like-kind exchanges stimulate economic activity and pro- mote property improvements that benefit communities, increase property values and local tax revenues, improve neighborhoods, and generate a multitude of jobs ancillary to the exchange trans- actions. These studies quantified that restricting or eliminating like-kind exchanges would result in a decline in gross domestic product of up to $13.1 billion annually, reduce velocity in the economy, and increase the cost of capital to taxpayers. A 2016 Tax Foundation report estimated an approximately $18 billion annual economic contraction. 1031 exchanges contribute signifi- cantly to the velocity of the economy and promote investment in U.S. property. Owners of investment real estate are encouraged by the tax benefits to reinvest in U.S. real estate. Also, Section 1031 provides a strong incentive to multinational companies to maintain and increase investments in the U.S. investment property markets. Investment Taxpayers Like-kind exchanges benef it the economy in multiple ways. Commer- cial real estate owners, individuals, and businesses of all sizes use like- kind exchanges to trade up to larger facilities. The ability to take advan- tage of good business opportunities stimulates transactional activity that generates taxable revenue for many professions, including brokers, lend- ers, appraisers, surveyors, inspectors, insurers, attorneys, and accountants. This transactional velocity also creates opportunities for smaller "These studies quantified that restricting or eliminating like-kind exchanges would result in a decline in gross domestic product of up to $13.1 billion annually, reduce velocity in the economy, and increase the cost of capital to taxpayers." businesses to acquire entry-level facilities and used equipment from which to launch and grow their fledgling businesses. Like-kind exchanges remove friction from business transac- tions and stimulate economic activity for all business investment taxpayers. Section 1031 facilitates opportunistic investment of capital and community improvement. Like-kind exchanges assist the recycling of real estate and other capital to its highest and best use in the marketplace, thereby creating value and improving economic conditions for local communities — rural and urban. A broad spectrum of taxpayers would be harmed if they had to pay taxes for moving their investment or reinvesting their business assets. Section 1031 meets the current tax reform goals perfectly. It's not a loophole, but a simple and sound tax policy that has been stimulating economic growth since 1921. It needs to be retained. Bill Horan is the owner of the Realty Exchange Corp. in Gainesville, Va. Contact him at bill@1031.us. BANKRUPTCY SALE Potential High Density Mixed Use Development Current Improvements Include: 72k SF/289 Bed Dormitory, 65k SF Office/Classroom Bldg, Expansive Athletic Facilities Located on William Floyd Pkwy Between LIE & Sunrise Hwy Extensive Infrastructure Already In Place 105 +/- ACRES – BROOKHAVEN, NY Former Dowling College Campus www.Dowling-RealEstate.com United States Bankruptcy Court, Eastern District of NY, Case Number: 16-75545 631.465.9511 800.547.1045 Broker Participation Invited