2019 was another record year for 1031 Exchanges. What’s in store for 2020?
Commercial real estate is predicted to have a very good 2020, supported by resilient economic activity, low interest rates and the attractiveness of real estate investment.
With an election year, government leaders will push to keep economic activity strong. A recession or major economic disruption is unlikely. However tax reform continues to be an issue that could drive transactional activity. Republicans want technical corrections. Many of the Democratic Presidential candidates are promoting substantive changes. Elimination of FIRPTA to encourage foreign investment is a bipartisan issue that could spur real estate transactions. Also, proposals such as mark to market, a wealth tax, increases in the tax rates, and increase or complete elimination of capital gains all could impact investor behavior. An increase in ordinary income tax or capital gains tax rates would make like-kind exchanges more valuable to taxpayers, but could also make 1031 a larger potential target for tax revenue seekers.
With expected growth in investment and commercial real estate transactions, we are expecting another strong year for 1031 tax deferred exchange transactional activity.