@article{8e5ed3947e4641699f06ad3d7ef628d2,
title = "The benefits and costs of tax deferral: An analysis of section 1031 exchanges",
abstract = "We examine the effects of Section 1031 of the Internal Revenue Code on commercial real estate (CRE) investors and markets, as well as on U.S. Treasury revenue. We first develop a partial equilibrium model that quantifies for the property owner the present value of tax savings in an exchange versus a fully-taxable sale and the cost in foregone tax revenues to the U.S. Treasury. We estimate that the incremental present value of a CRE exchange, as a percentage of the price of the relinquished property, ranges from less than 1% to approximately 8%. We then discuss the extent to which these incremental net present values (NPVs) can be used as estimates of the likely effects that elimination of CRE exchanges may have on local market values. Finally, we discuss the effects of elimination on U.S. Treasury revenue.",
keywords = "Commercial real estate, Internal Revenue Code, Net present value, Section 1031, Tax deferral, U.S. Treasury",
author = "David Barker and Ling, {David C.} and Milena Petrova",
note = "Funding Information: This manuscript was originally circulated as a part of a larger study entitled {\textquoteleft}The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate.{\textquoteright} We gratefully acknowledge the Real Estate Like-Kind Exchange Coalition for providing partial financial support for this project. We thank CoStar Group for providing the data used in our analyses. We also thank Ryan McCormick, Michelle Hanlon, Stuart Rosenthal, David Barker, Suzanne Baker, John Harrison, Rachel Hughes, Tony Edwards, Adam Cole, Dara Bernstein, Dennis Capozza, Robert Rozen, Amirhossein Yousefi, Jeffrey Fisher, seminar participants at the U.S. Treasury Office of Tax Analysis, National Association of Realtors, and the Homer Hoyt Institute and the AREUEA session participants at the 2017 ASSA Meeting for their helpful comments and suggestions. We also thank the Joint Committee on Taxation, the House Ways and Means Committee tax staff, and the Senate Finance Committee tax staff for helpful discussions. Finally, we thank the editor, David Harrison, for many helpful comments. Publisher Copyright: {\textcopyright} 2020 American Real Estate Society.",
year = "2020",
doi = "10.1080/09277544.2020.1791578",
language = "English (US)",
volume = "28",
pages = "1--29",
journal = "Journal of Real Estate Literature",
issn = "0927-7544",
publisher = "American Real Estate Society",
number = "1",
}