Personal property exchanges have been completely abolished, which is the main alteration to Section 1031. The Code provision has been renamed “Exchange of real property held for investment” and now only refers to real estate assets.
The same laws and requirements apply to real estate exchanges under primary legislation. The role of the Qualified Intermediary is unaltered, as are the 45-day identification and 180-day exchange periods. In addition, all domestic real estate in the United States, whether improved or unimproved, continues to be of like type. Foreign real estate is still not comparable to American real estate.
Intangibles like patents, licenses to operate fast food restaurants, and broadband spectrums are examples of personal property assets that can no longer be swapped. Other investments include cars, trains, boats, cattle, artwork, and collectibles.
Instant expense. Heavy machinery, farm equipment, vehicles, and hotel furniture are tangible personal property assets with a total cost that can be written off by the taxpayer in the year they are put into use. The full expensing deduction can be utilized to offset any capital gains or depreciation recapture realized in the same or subsequent years, even though tax cannot be delayed through like-kind exchanges for these assets. Full expensing is only available for a short period of time; it will end in 2022. After that, it will be reduced to 80% for assets put into service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. Both new and used assets that the taxpayer purchases are eligible for this deduction.
Thanks to everyone who persistently supported Section 1031’s preservation through meetings, calls, letters, and more during this process. Without our collective voices informing Congress of the vast advantages of Section 1031, this crucial tool may have been completely repealed. Every little bit of assistance was appreciated. We all congratulate you!
We are highly appreciative of all the members of Congress who paid attention, comprehended, and voted to keep Section 1031 in this tax reform legislation.
