In 1921, the United States Congress faced a crossroads. We had just finished beating the Germans in World War I. In the process of funding that war effort, the country ran up a deficit. Furthermore, we were taxing people heavier than they’d ever been taxed before. During that timeframe, the highest income tax bracket was 73%. To pay down the war debt, Congress faced a decision – either continue to maintain these high tax rates, or try to grow the economy by broadening the base of taxpayers and the velocity in the economy. They chose the latter.
As part of that legislation in 1921, we have the precursor of section 1031 – a provision that allowed for the deferral of gains. The rationale behind that provision was that if you’re going to have a continuity of investment, why should we penalize taxpayers for continuing their investment? If we did penalize taxpayers there would be a “lock-in” effect where taxpayers simply wouldn’t sell. If you knew you were going to have to give away a third of your hard-earned equity when selling your farm, would you sell it? Many would not. They would hold onto the property to avoid the imposition of tax.
Why is this history lesson even relevant? Because the same rationale exists today for maintaining section 1031. It stimulates the economy. I prevents the lock-in effect. It increases velocity in the marketplace.
Start Your 1031 Exchange Journey Today
Start your 1031 exchange journey today by giving a qualified intermediary a call. CPEC1031, LLC employs qualified intermediaries with more than two decades of experience. We have a proven track record of completing successful like-kind exchanges for our clients. We can help you through many hoops of a 1031 exchange – making sure all of the details specific to your transaction are covered. Contact us today to learn more about the numerous benefits of conducting a 1031 exchange and get yours started today.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2024 Copyright Jeffrey R. Peterson All Rights Reserved