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Conclusion

Section 1031 is a very important catalyst in the economy.

It literally puts into motion billions of dollars as well as increasing the local property tax base. Every exchange transaction creates an even bigger taxable event than the one it defers . The only cost for all these benefits is to defer the taxation on the gain of the property that the taxpayer/investor is leaving behind. Taxpayer/investors under existing law pay taxes on all cash, personal property received, and relief from mortgage indebtedness which they experience.

Those people that believe that a change in Section 1031 will lead to an increase in revenues are simply wrong because they are assuming that taxpayers do not and will not take tax consequences into account when they decide whether or not to exchange their properties. Investors are willing to make choices about how they handle their investments - the upsurge in exchanges proves this. In fact, a huge portion of investors will not volunteer to pay taxes on transactions that by definition cannot produce the cash to pay the taxes. A change in Section 1031 would in fact be a direct tax on investment which would have serious crippling effects on the economy as a whole and which would actually lead to a big drop in revenues.

Section 1031 is an important and valuable revenue catalyst which should be left alone.