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Sample Letter to Congress

This is a copy of a letter that was sent to Congress in 1989 when it was proposed that Section 1031 Exchanges be restricted. The best letter you can write is the one that comes directly from your own convictions. We hope that we have provided you with the essential arguments as to why Section 1031 is good news and why changes to Section 1031 would be bad news

Dear Member of the Joint Committee on Taxation:

I am writing to you to express my deep concern about proposals to modify Section 1031 of the Internal Revenue Code. I am an investor who has used Section 1031 in the past to move from one real estate investment into another while deferring taxation on the gain.

I share your concern for the budget crisis which we are facing, but modification of Section 1031 will NOT help matters. Do you really think that I will put up with the trouble and expense to exchange out of my investment property and into another if I have to reach into my savings account to pay taxes? You should know that under existing law to defer taxes on the property that I will exchange out of I cannot receive any cash or loan relief in the process. By definition the exchange cannot produce any cash for my benefit. Where do you expect me to find the cash to pay the taxes? The only thing that modification of Section 1031 will do is to keep me from exchanging my property!

I made a decision several years ago that I did not wish to rely on government to secure my retirement. My plan was to invest in real estate. Section 1031 has made it possible for me to increase that investment over the years by exchanging into a bigger investment as my equity and ability to pay have grown. If you change Section 1031 I will just have to stay where I am and not increase that investment. When I can't increase my investment everyone will suffer, and this will NOT help revenues either. Don't you realize that when I acquire a property through exchange that I create a tax liability for the seller? I also create immediately taxable income for all of the people who help make the deal such as brokers, bankers, title insurance companies, escrow companies, builders, and so forth. All of this activity will stop if you change Section 1031!!

I should also add that when I exchange a property both my old and new property are reassessed by the county tax assessor. Thus, our county revenues will also suffer if you change Section 1031.

From all of the foregoing it should be abundantly clear that Section 1031 helps to raise revenues and stimulates further investment.

LEAVE SECTION 1031 ALONE !

Sincerely,