Millionacres recently interviewed our New York partner Robert Kiggins to discuss the IRS’s proposed changes to Section 1031 rules for like-kind property held for business, trade, or investment purposes.
Here are some excerpts from Robert’s interview:
Some context from a tax lawyer
Robert Kiggins, the tax chair for Culhane Meadows in New York, provides some context about the proposed changes to help inform Millionacres readers who may want to offer their opinion to the regulator or would just like to be informed about what to expect.
First, Kiggins says, the proposed changes should make it clearer which property will qualify for a tax-deferred, like-kind exchange of real property under Section 1031. “Basically, the treatment of certain personal property involved in an exchange which could have complicated the tax treatment of the exchange would be clarified,” the New York attorney says.
“This should leave less guesswork as to whether the presence of an item that might be regarded as personal property would reduce, or eliminate, tax benefits of the exchange.”
The three main takeaways
In sum, Kiggins says:
- The proposed regulations amend the existing regulations to add a definition of real property to reflect statutory changes limiting Section 1031 to exchanges of real property.
- The proposed regulations also provide a rule addressing a taxpayer’s receipt of personal property that is incidental to real property the taxpayer receives in the exchange.
- The proposed regulations affect taxpayers who exchange business or investment property for other business or investment property and who must determine whether the exchanged properties are real property for purposes of Section 1031.
Kiggins says these changes should give investors greater certainty about the tax outcome of a given proposed 1031 exchange.
“Nonetheless,” he adds, “it will remain important to engage in thorough due diligence to get all of the facts and circumstances regarding any potential item of personal property which would be part of a 1031 exchange.”
A matter of tax timing
Kiggins points out that the proposed new regulations apply to exchanges beginning on or after the date they’re published as final regulations in the Federal Register.
“Pending issuance of the final regulations, a taxpayer may rely on these proposed regulations, if followed consistently and in their entirety, for exchanges of real property beginning after Dec. 31, 2017, and before the final regulations are published,” he said.
The complete article can be found here.
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The largest woman-owned national full-service business law firm in the U.S., Culhane Meadows fields over 70 partners in ten major markets across the country. Uniquely structured, the firm’s Disruptive Law® business model gives attorneys greater work-life flexibility while delivering outstanding, partner-level legal services to major corporations and emerging companies across industry sectors more efficiently and cost-effectively than conventional law firms. Clients enjoy exceptional and highly-efficient legal services provided exclusively by partner-level attorneys with significant experience and training from large law firms or in-house legal departments of respected corporations. U.S. News & World Report has named Culhane Meadows among the country’s “Best Law Firms” in its 2014 through 2020 rankings and many of the firm’s partners are regularly recognized in Chambers, Super Lawyers, Best Lawyers and Martindale-Hubbell Peer Reviews.
The foregoing content is for informational purposes only and should not be relied upon as legal advice. Federal, state, and local laws can change rapidly and, therefore, this content may become obsolete or outdated. Please consult with an attorney of your choice to ensure you obtain the most current and accurate counsel about your particular situation.