Saw a seminar on these topics. No step up basis would be most impactful to me. I thought of doing a 1031 as I'd like to sell some farm ground in another country and buy in the county I live in, but haven't learned enough about it to do it. A session on that at a convention would be welcome.

discuss how the current administration plans to eliminate 1031 like-kind exchanges, step-up in basis upon death, and deductions for energy investors. Not to mention potentially devastating increases in various tax rates.

Hard roads lie ahead for landlords it seems.

I've always thought that the step-up in basis made no sense and was unfair. It was simply a way to postpone taxes on something for so long that you died -- and then were able to give it to someone else without them paying the tax that was due. Always seemed a bit wrong to me -- a way to legally avoid paying taxes that should have been due because they were only supposed to be "postponed." I support removing that loophole actually.

Luch,

Every time a dem is pres or majority in either house the rumors fly about ending 1031s. It DOES make libs sound tough on rich folks. Gets votes from the tax the rich crowd. Like Jim said it never goes anywhere because rich donors still want it.

Based on what I read in your post I suggest more education and advice. Go to the company I use APIexchange.com. Good for training.

Here's one thing we can always count on: Govt will leave loopholes for their friends to exploit. We need to keep our eyes open and figure out the way to use those same loopholes. Every tax break was written into law by a governing official looking out for their constituents' best interest.

Stepped up basis accounts for the increase in an asset's value due to inflation, which eats away at the real purchasing power of dollars. Not only should we keep that, but also we should extend it to sale of capital assets during the original owner's lifetime. You shouldn't be taxed on something just because reckless US fiscal policy is devaluing the USD. Every year, the basis of your investment should be adjusted upward by at least the value of CPI.

Example: purchase property for $100,000. 40 years later it is now worth $1,000,000, but the value of the USD has gone down 90% during the same time. Why ought I pay taxes on $900,000 "profit" when $1,000,000 buys me the same number of Big Macs as $100,000 did 40 years ago? I would take a net loss.

This is why some wealthy individuals don't sell assets/equities: they just borrow against them. The cost of interest often is less than the taxes they'd pay out to recapture depreciation (for real estate) and in capital gains.

So, you eliminate step up basis on property and most family owned farms of any size would cease to exist.

Property and machinery would have to be sold to simply pay the taxes due.

Frank: You're talking about two very different things... Taxes from the sale of a property (which is what we're talking about with 1031s and the step-up basis) is very different than estate taxes -- and they SHOULD be different.

You don't have to pay any estate taxes up to just over $12,000,000 in 2022. None of those people with their tiny "family owned farms" are having to sell anything to pay any taxes due unless that farm is worth more than $12,000,000.

And, again, that has little to do with the concept of the previous owner having done one or more 1031 exchange over the years and never paying the taxes for that.

You talk about "taxes are paid on the income from the business". Well, taxes should also be paid on the income from the SALE of property (i.e. capital gains taxes). Those taxes were POSTPONED and not yet paid due to the 1031 exchange. So, at some point, those POSTPONED taxes should have to be paid. The step-up basis loophole allows postponed taxes to be ignored. That just doesn't seem right to me.

But, again, that's very different than "estate taxes" on inheritances over $12,000,000.

John... what are you thoughts on indexing the basis of assets by CPI, as I outlined above?

My basic premise is inflation doesn't produce any real profits, so there should be no tax due.

John, depends on your state.

Sid: I would consider it but, put simply, I think it is over-simplifies things to the point where it is just incorrect most of the time. You seem to be basing it on this idea that property values haven't increased more than inflation over most periods of time. I'm not sure that is accurate.

It is absolutely not accurate over, say, the last 3-10 years! And this is a time when our inflation has been insanely high! Even with our current high inflation, in MANY areas of the country, property values have skyrocketed MUCH more than inflation.

So, even adjusting for CPI, I would say that if you bought something in many areas in 2019, then it is worth a LOT more today.

Your example of "over 40 years", MAYBE depending on the dates. But the reality is that, with 1031 exchanges like we're talking about, it often is not holding a property for decades. The whole point of the 1031 is moving to something newer and NOT holding it for 40+ years. In those case, sales were made along the way and we normally charge capital gains for those sales. The 1031 allows that tax to be postponed. And a death loophole allows that tax to be ignored. I still maintain that that isn't right.

If you want to argue about how capital gains on sale should be calculated and that you want CPI included in that calculation, then you are free to argue that. But that should apply across ALL of the sales. That's not at all related to the 1031 situation. Even if I don't do a 1031 and sell, I'd love to have CPI included to bring down my "gains". But, again, that's an unrelated argument.

WMH: You're missing the point. We're talking about 1031 exchanges here. So, yes, it would be a situation where you DID sell things. You sold them and then bought something else with the 1031 exchange. Often, multiple sales occurred. When you sell a property, you owe capital gains tax. A 1031 allows you to postpone those taxes. If your kids are inheriting the property that allowed you to postpone taxes on a sale, then it makes sense that the tax should still be due.

Again, your kids already get a $12,000,000+ exemption on property that they inherit from you that was NOT part of a 1031 exchange. Where you did NOT "sell" like you mentioned. But that isn't what we're referring to here.

Luch

It sounds like you are attending the convention.

John, the OP wrote: "Discuss how the current administration plans to eliminate 1031 like-kind exchanges, step-up in basis upon death, and deductions for energy investors. Not to mention potentially devastating increases in various tax rates."

WMH< OP also said: "No step up basis would be most impactful to me. I thought of doing a 1031..."

So, I assumed he was combining them together for his discussion. Because, again, you can inherit $12,000,000 and owe ZERO in (federal and most state) inheritance taxes. Therefore, if you aren't worried about the 1031 tax avoidance, it really doesn't matter that much.

I get that I'm a little biased on this and others may disagree -- but I just feel like if you're inheriting MORE THAN $12,000,000 WORTH, then I don't feel too bad if you have to pay some extra tax for the part over $12,000,000 because you didn't get a stepped-up basis for that calculation.