THE IMPACT OF TAX REFORM ON THE REAL ESTATE INDUSTRY: SECTION 1031 EXCHANGES - Taxpayers can continue to defer gain on real estate in Section 1031 like-kind exchanges. - Real estate exchange are subject to the same rules and regulations as under the previous law. The 45 day identification and 180 day exchange periods remain unchanged. - Personal property assets that can no longer be exchanged include intangibles, such as fast-food franchise licenses and patents, aircraft, vehicles, machinery & equipment, etc. LIMITATION DEDUCTION OF BUSINESS INTEREST- SECTION 163 (J) - Section 163(j) limits the net interest expense deduction for most businesses to 30% of adjusted taxable income. - For tax years beginning in 2018 through 2021, the computation of adjusted taxable income should approximately reflect a business’ earnings before interest, taxes, depreciation, & amortisation. COST RECOVERY- CHANGE TO SECTION 168 - Section 168(g)(8) - Taxpayers electing to use the real estate exception to the deductibility of business interest limit must depreciate real property under longer recovery periods: - 40 years for nonresidential property; - 30 years for residential rental property; and - 20 years for qualities interior improvements. LIMITATION OF DEDUCTION FOR EXCESS BUSINESS LOSSES- SECTION 461(I) - New Section 461(I) - For taxable years beginning after December 31, 2017 and before January 1, 2026, the excess business losses of a non- corporate taxpayer are not allowed for the taxable year. - The non-corporate taxpayer’s excess business loss for a taxable year is carried forward and treated as part of the taxpayer’s net operating loss carryforward in subsequent taxable years. - To be continued... #StephensBrosTaxService #Section461 #Section168 #RealEstate #RealEstateInvestor #LikeKindExchange #CostRecovery #ExcessBusinessLoss #QualifiedProperty #TaxTreatment #Deductions #PersonaProperty #Investment
