Since the 1031 exchange rules were written in 1921, Congress has continually discussed eliminating this tax benefit. In the current deficit reduction and tax reform climate the 1031 exchange has come up for review for elimination. The Federation of Exchange Commentators, the professional trade group that I belong to appeared before The Joint Committee on Taxation on July 19, 2011. The FEA published a report on current 1031 activity. This report concluded that the JCT tax cost estimate of section 1031 costs in tax revenue of $15.6 billion was grossly overstated. The FDA estimate is $2.9 billion or less due to fewer sales, lower profits and slow growth projections. The Congressional Gang of Six suggests that any estimated tax cost of $10 billion or above will be on the table.
We believe the 1031 exchange will be off the table.