Contributed By Allen Matkins Leck Gamble Mallory & Natsis LLP
There has been some discussion of eliminating like-kind exchanges, which allow investors to defer the payment of tax on profits from the sale of certain assets if the sale proceeds are reinvested in certain like-kind property. Section 1031 of the federal tax code remains applicable to real estate investment but has been eliminated for all other assets.
Corporations are taxed differently from individuals. The highest income tax rate for corporations is 21%, and the highest individual rate is 37%. The recent legislation generally allows for a so-called “pass-through” deduction to individuals who are partners or members of a partnership or LLC that owns real estate. Generally, “qualified business income” that passes through the partnership or LLC to the partner or member may be eligible for a 20% deduction, subject to certain limitations and conditions.
The tax reform also put in place certain carried-interest rules, under which an investor is generally eligible to receive long-term capital gain treatment for carried interest if the carried interest was held for more than three years.