On November 2, 2017, Kevin Brady, Chairman of the Committee on Ways and Means, released the “Tax Cuts and Jobs Act” (H.R. 1). The House tax bill proposes eliminating personal property 1031 exchanges after the end of 2017. In addition, the House tax bill proposes a transition period for any personal property exchanges started before December 31, 2017. The House tax bill proposes full expensing for most personal property purchases for five years.

There are no proposed changes to 1031 exchanges of real property in the House tax bill.

Senate Tax Bill Repeals Personal Property Exchanges, but Preserves Real Property Exchanges

On November 9, 2017, the U.S. Senate Committee on Finance released the “Description of the Chairman’s Mark of the Tax Cut and Jobs Act.” Under the heading “Like-Kind Exchanges of Real Property” is the description of the proposal. The proposal modifies the provision providing for nonrecognition of gain in the case of like-kind exchanges by limiting its application to real property that is not held primarily for sale. The proposal generally applies to exchanges completed after December 31, 2017. However, an exception is provided for any exchange if the property disposed of by the taxpayer in the exchange is disposed of on or before December 31, 2017

, or the property received by the taxpayer in the exchange is received on or before such date taxpayer in the exchange is received on or before such date. The Senate tax bill proposes full expensing for most personal property purchases for five years.

There are no proposed changes to 1031 exchanges of real property in the Senate tax bill.

The Joint Committee on Taxation (JCT) projects these changes to Section 1031 will increase tax revenues by $30.5 billion between 2018-2027.