The Like-Kind Exchange Coalition has submitted a letter to House Ways and Means Chief Tax Counsel Ms. Barbara Angus encouraging the retention of like-kind exchanges at the current unlimited amount of gain deferral. Like-kind exchanges are similar to other non-recognition and tax deferral provisions because they result in no change to the economic position of the taxpayer. Taxpayers immediately recognize gain to the extent that cash or “boot” is received during an exchange.
“Like-kind exchanges are integral to the efficient operation and ongoing vitality of thousands of American businesses, which in turn strengthen the U.S. economy and create jobs,” reads the letter. A wide range of industries, business structures and sizes rely on like-kind exchanges, and as the Ling-Petrova microeconomic study findings show, entrepreneurs would have less incentive and ability to make real estate and other capital investments without the provision.
Lastly, the letter points out that a $1 million limitation of gain on deferral per year, as proposed by the Obama Administration, would be particularly harmful to the economic stream generated by like-kind exchanges of commercial real estate, agricultural land, and vehicle/equipment leasing. The turnover of assets is key to all of the economic activity and taxable revenue for ancillary businesses that depend on high-volume exchanges.