re: Biden wants to kill 1031 Exchanges (read this. it's important)

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I submit that only one of those things is "earnings"

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Does a CD earn interest?

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I see flaws here. If he sells for $450k then his capital gain is $150k and at 25%, a tax bill of $37,500, leaving a net of $412,500.

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Huh? Not sure where any of your numbers come from. Seems like a circle jerk.

Literally every single thing the democrats are pushing sucks arse. And the common person doesnt understand why these things are bad

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Literally every single thing the democrats are pushing sucks arse. And the common person doesnt understand why these things are bad

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Well, that's how they sell things, isn't it? They will swoop in and frick you like a ninja, and once you have given up ground they will never give it back.

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Yea. I kind of bumped it back to Obama levels. I just assume that is where it will be, not where it is. Trump made life good. Biden will most assuredly take us back ASAP.

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That's reasonable. I can dig it.

Thanks for the explanation.

Should have called it 30% if they get control.

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Actually this is how people in real estate Pay little to no taxes. It’s the same way with stocks. You only get taxes if you sell and keep the money.

The only people it really benefits are the children that become trust fund babies. In reality the money should be taxed because it’s a transaction and everything else is taxed, why not real estate. I’m totally against it.

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You have a poor understanding of this.

No, it's not the same way with stocks. If I sell a stock that has appreciated, I pay cap gains tax on it. I don't get to roll it over to another stock and defer the gain. Show me how to do this, please.

That's what the 1031 exchange does (read the OP). Not the same as stocks.

The above is not about being for/against the 1031, I'm just laying out the facts.

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Isn't cap gains set at either 15 or 20% right now?

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I thought long-term were 10, 15, or 20. That's why I was asking about the 25, bc I definitely could be missing something.

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They might be thinking about the recapture of depreciation. I'm no expert, but have been reading up lately for a friend with a rental. You are required to depreciate a % each year and you get a tax break in that year, but that is recaptured when you sell, at 25%.

LINK

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If sold as a long-term gain, under current tax laws, long-term capital gains tax rates range between 0% – 20% depending on the taxpayer’s level of income. However, not all gains benefit from the long-term capital gain tax rates. Depreciation recapture is the portion of the gain attributable to the depreciation deductions previously allowed during the period the taxpayer owned the property. The depreciation recapture rate on this portion of the gain is 25%.

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Does a CD earn interest?

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Yes...........IF it outpaces inflation.

Frankly, if inflation was 3% and your CD "earns" 3%, you have the same thing at the end you had at the beginning.

Worse, if your CD "earned" 2%, from any reasonable perspective, you LOST money. And they're gonna tax you for that!!!

I am almost universally against tax increases, including this one, especially when the motivation behind it is simply to stick it to a particular political opponent, and when the unintended consequences would render the meager revenue generation moot, but you made some pretty wild assumptions in your hypothetical.

Not only did Bob's property lose 70% of its value overnight, but he either chose to or was forced to sell at that price? Why would he do that?

And the tax basis being retroactive to properties he hadn't owned in years and sold during the Bush administration? The cost of tracing alone, if even possible, would outweigh the revenues. In your example, Bob's tax basis in the post 1031 world would be $1.5 million, not $300k.

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A capital gains tax would be due on the difference between Bob's tax-basis (the $300k he originally spent on the commercial building in 1990) and the current value (the $1.5M). If Bob is paying cap-gains tax at a 25% tax rate that means Bob will have to figure out how to scrounge together $300K for the Biden real estate tax, all due in the current tax year.

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This also seems made up. 1031s allow tax avoidance following the sale of property. That's a realized gain. You're adding an unrealized cap gain tax onto this proposal.

And all of this is assuming Bob is bringing in more than 400k/year in rents from the properties. If he is (and the assumption is this repeal would only increase rents right?), then it would be mathematically impossible for the value of the property to go down to $450k.

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Fair Warning: If he gets this passed, they'll be coming after the capital gains on the home next.

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Maybe they will, maybe they won't, but unless you're going to roll back capital gains on stock sales, I have no problem with real estate transactions having the same rules.