Senate Considers Limit on 1031 Exchanges

From N.A.R. and Realtor.org

The Senate version of a major Farm Bill (H.R. 2419) included a limitation on some like-kind exchanges. This bill passed the House earlier in 2007. The proposed modification would disqualify exchanges of "improved real property" with "unimproved agriculture real property." Thus, the owner of a building could not use the 1031 exchange technique to acquire "unimproved agriculture real property." The provision would have the effect of imposing a "toll charge" on any person selling the affected property. The toll charge would take the form of either a reduction in the price that the seller could obtain on sale or the transaction would require a selling farmer/rancher to pay tax on the transaction.

NAR vigorously opposed this provision in the Farm bill. Other organizations followed NAR's lead. NAR is cautiously optimistic that this provision will not be included in any final version of the Farm Bill. Currently, a conference committee is scheduled to convene later in the spring to iron out the many differences in the legislation.