Given that election time is but six months away, I’m hearing a bunch of ‘what if’ discussion from clients, friends and other commercial brokers regarding potential tax ramifications with the Bowles – Simpson Plan, the Ryan Plan and the Buffet Rule and the ramifications if you choose not to do a 1031 exchange.
I don’t think any of these stand a chance of passing in their current form by the current congress. Of course we have November 6th ahead, and the POTUS, new congress and the control of the senate up for grabs. Who knows what could happen. Even if Obama is reelected, and I think there’s a 60-40 chance of that. If the Republicans can hold the house or capture the senate, we probably don’t have a lot to worry about. If the Democrats win it all, I think we have a bunch to worry about. I think it’s a certainty that the 15% capital gains rate is a goner. If it goes to 20% or 28% or even the earned income rate, what do we do?
If it looks like the Dems are going to win it all, we’ll probably see quite a bit of selling to just cash out, pay the current 15% long term rate and be done with it. That’s a viable option. Of course if that’s your decision I will be happy to list your property.
There’s much uncertainly ahead regarding exit strategies given what could happen with capital gains tax rates. What is fairly certain is the option of a 1031 exchange to kick the ball down the road a bit until tax rates are once again favorable to cash out.
With the retail product of choice that’s so hard to find: triple net or absolute net, single tenant, long corporate lease with a credit tenant that’s S&P BBB or better, there’s always the possibility of doing a reverse 1031 exchange. I’m talking about retailers and fast food such as Walgreens, CVSs, 7-Elevens, Circle Ks, McDonalds, Taco Bell / KFCs, etc.
I’ve attached a link below to one page flyer that examines the three plans put forth that I mentioned in the first paragraph versus doing a 1031 exchange.
As always, if you have any questions, call me, Scott Harris at 310-473-4789 or 614-905-6614 and I’ll do my best to answer your question or find a source who can answer your question.