NCE Main

Packages Online Main

Conference Main

Feedback to NCE

Good News When Investors Choose to Do Exchanges

1. The Federal and State Governments Benefit. For every transaction that utilizes section 1031 an equal or bigger potential tax event is created with another taxpayer. (Almost always substantially bigger tax event)

For those persons who keep moving their real property asset values "up" through Section 1031 there is the chance for a secure retirement this in turn leads to a smaller load on social services by these people. We are not talking here about a bunch of rich "fat cats" here - we are talking about the secure retirement of tens of millions of Americans who have prudently invested their money in real estate during their productive lifetimes (not just in their own homes, but in housing and places of business for the use of others).

2. State and Local Governments Benefit. Use of Section 1031 creates an opportunity (in most states) for the local reassessment of property taxes. This creates a bigger tax base for local governments - we are talking billions of dollars in increased local tax revenues.

3. Banks and Lending Institutions Benefit. Use of Section 1031 almost always leads to the retirement of older real estate loans and creation of new real estate loans. This benefits the banking and mortgage industries by allowing them to retire old mortgage assets and replace them with newer assets. (This process increases asset values in lending institutions and avoids the weakening of mortgage portfolios which is caused by holding older, lower rate mortgages). It also allows banks to make immediate profits from the loan costs associated with such new loans.

4. All Real Estate Investors Benefit. Even those who don’t do exchanges. Use of Section 1031 provides real property liquidity during difficult economic periods because it makes possible a exchange of real property assets by investors even though no money may be available directly from the transaction or from lenders. This can be critical to the prevention of regional real property value collapse which can be caused by forced "distress" cash sales of real property. (Although not easily measured, this form of asset mobility additionally helps the economy during times of distress.)

5. The Real Estate Industry Benefits. Section 1031 transactions provide jobs and a market for the products and services of millions of Americans - real estate brokers and agents, appraisers, employees of lending institutions, title insurance companies, escrow companies, attorneys, large and small building contractors and so forth.

6. The Construction Industry Benefits. Section 1031 creates the capital availability for the construction of new housing and business property both large and small. As investors move out of one investment they move into larger ones this constantly provides pressure for the acquisition of bigger projects. (what is "bigger" varies depending on the individual investor - it could be a slightly larger house or a skyscraper). This cash is being partly generated by Section 1031.

7. Our Environment Benefits. People who would not otherwise be interested in disposing of wilderness and critical habitat properties may be induced to exchange those properties for other types of property – if they don’t get penalized by a tax to do so. Exchanging is a valuable tool in the acquisition and preservation of special pieces of property.