What Did Rental Car Companies Do After Personal Property Exchanges were Restricted in 2018

Prior to 2018, personal property exchanges were allowed under section 1031. Rental car companies were among the largest users of this tax-deferral tool. They would sell an aging fleet of vehicles and reinvest the net proceeds into newer vehicles while deferring their capital gains tax.

After personal property exchanges were restricted in 2018, initially rental car companies didn’t care much because they got immediate expensing. They were able to take an immediate tax deduction and write off their brand new vehicles. But that expensing is ratcheted to decrease over time. Eventually, these companies are not going to be able to take those tax-advantages write-offs and they’re going to wish they could continue to exchange their vehicle fleets under the old 1031 rules.

These companies who used to rely heavily on personal property exchanges were enticed by the immediate gratification of expensing, without thinking through the fleeting nature of that perk. When these companies are no longer able to expense a large portion of these vehicles, they may regret not pushing harder to keep personal property exchanges.

Find a 1031 Exchange Company Near You

Find a 1031 exchange company near you today to get started with your next like-kind exchange of investment real estate. Anyone who owns qualifying US real property can avail themselves of the many benefits of the 1031 exchange. If you’re curious about whether or not your property is a good fit for 1031 exchange treatment, contact a 1031 exchange company near you to learn more about the process, its benefits, and whether you can do an exchange with your property.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

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