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Before the election, President-elect Joe Biden said he’d look to axe one of small businesses’ most valuable tax benefits. With Democrats taking Senate control, the risk is potentially heightened.
Fortunately, for those who own commercial real estate, eliminating the 1031 exchange probably won’t make Biden’s near-term agenda after all.
The 1031, also known as a like-kind exchange, benefits small business owners who want to sell their properties. It allows sellers to defer capital gains tax when their proceeds are reinvested into other investment properties.
Right now, the 1031 exchange is more important than ever. During the coronavirus-caused economic downturn, it has helped relieve the tax burden on those who are selling investment real estate that may be tied to struggling sectors such as hospitality. Investors who own other types of real estate, such as rental homes, apartments, retail centers, restaurants, bars, farms, and ranch lands may also use a 1031 exchange.