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Tuesday, September 21, 2021
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Other People’s Money is Cheap, Mr. Biden Wants to Spend It

#tax #Biden #RealEstate #money

$DIA $SPY $QQQ $RUTX $VXX

For now the real estate industry does not appear concerned, as it will never pass” — Paul Ebeling

Mr. Biden, 78 anni & ailing, has proposed narrowing a tax code provision that allows real estate investors to avoid capital gains taxes when they sell property, as long as they use the gains to buy more.

The 1031 like-kind exchange rule, named after a section of the federal tax code, was created a 100 yrs ago to aid family farmers. It has evolved into a tool of property moguls, Fortune 500 companies, and real estate trusts that can use it to create tax avoidance. It is not a loophole.

How it works: An investor buys a building for $4-M and sells it later for $10-M. By redeploying the proceeds into a new property within 6 months, the investor can defer paying taxes on the gains. And can repeat that process indefinitely.

When coupled with another tax break that wipes out all capital gains at death, the 1031 provision can enable real estate investors to forgo capital gains taxes entirely, enabling family dynasties to pass on riches to heirs nearly tax-free.

Repealing it could add $19.6-B in tax revenue over 10 yrs, according to a proposed budget published by the White House last Friday. That is small element of Mr. Biden’s money is cheap, lets spend it notion. Not to mention his transfer America’s Winners wealth to Americas Losers plans.

Real estate executives say that would decrease the number of transactions, squelch economic activity, and reduce property values.

The National Association of Realtors argues that 1031 exchanges are Key to keeping the commercial real estate market humming and that they are primarily used not by the super-rich, but by less affluent retirees, investors, and landlords.

Yet Internal Revenue Service (IRS) data shows that 33%+ of the tax savings from 1031s goes to large institutional investors such as REITS and corporations.

Senate Majority Leader Mitch McConnell (R-KT) heaped scorn on the plan, and warned Democrats to “move beyond the socialist daydream and the go-it-alone partisanship.”

Tuesday, the benchmark US major stock indexes finished at: DJIA+45.86 at 34575.31, NAS Comp -12.26 to 13736.50, S&P 500 -2.07 to 4202.04, and the Russell 2000 rose 1.1%. 

Volume: Trade on the NYSE came in at 1.0-B/shares exchanged.

  • Russell 2000 +16.2% YTD
  • DJIA +13.0% YTD
  • S&P 500 +11.9% YTD
  • NAS Comp +6.6% YTD

HeffX-LTN’s overall technical outlook for the major US stock indexes is Bullish to Very Bullish in here.

Looking Ahead: Investors will receive the wkly MBA Mortgage Applications Index and the Fed’s Beige Book for June Wednesday

Have a healthy day, Keep the Faith!

Paul Ebeling
Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.   

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