Posted by Alexander Hendrie, Natalie De Vincenzi on Tuesday, June 21st, 2016, 10:54 AM
Like-kind exchanges, a provision existing under section 1031 of the tax code allows an investor to defer paying capital gains taxes on certain assets when they use those earnings to invest in another, similar asset. This can be done again and again until the investor ultimately cashes out and protects against a needless lock out effect that would discourage investment.
In the perfect world, income from capital gains would not be taxed at all. The 23.8 percent tax hits income that has already been subjected to income taxes and is then reinvested to help create jobs, grow wages, and increase economic growth. This double taxation makes no sense from the perspective of encouraging investment and stronger growth.
The importance of like-kind exchanges led to 19 Members of Congress writing to urge the preservation of section 1031 like-kind exchanges in a letter to ways and Means Committee Chairman Kevin Brady (R-Texas).