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AB2640 Seeks to Repeal 1031 Exchanges in California

March 15, 2010

First of all, for those of you who dropped me a note wondering if I was still alive, rest assured I am. Thanks for the concern.

Now to the pressing issue, a bill within the California state assembly which seeks to repeal the tax benefits of 1031 exchanges in California. We’ve been discussing for a while here the likely pressure on lawmakers to seek to repeal Proposition 13, at least for commercial properties. Given the perceived difficulty in toying with Prop 13, it seems some have decided to go after 1031 exchanges instead.

AB2640 seeks to repeal 1301 exchanges for California income tax purposes effective January, 2010. Given that the state tax rate is at some 9.5% right now, this would have a pretty big impact on the benefits of investment property ownership, particularly in California.

The bill was introduced by Juan Arambula. To contact your local state representatives, use this lookup tool to find him or her, and their contact information.

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Categories: Commercial Finance and Lending | Commercial Real Estate Investing | Trends
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joshua March 17, 2010

juan is a tool. this state is really starting to bother me. go after anything that doesnt affect you and spend all the money we bring in on the things you care about. where the fuck is the spine from our representatives? worthless state legislature/government.

Froggy March 17, 2010

Total nightmare if this were to happen.

LC Chase March 19, 2010

UNBELIEVEABLE!! If this were to pass you can put a knife in the real estate industry- Talk about kicking you while you're down-

Mario Cerasuolo March 26, 2010

I cannot see something like this passing. It would devistate an already weak state economy. But we all know crazier things have happened….

The credit markets are a mess but, throughout this crisis, we have always been able to finance real estate NNN leased to investment grade tenants. The NNN space is ideal for 1031 exchanges because the buildings come with no landlord responsibilities yet have great cash-flow. This would not only damage the real estate markets but would further cripple commercial mortgage lending. This is a very bad idea.

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