Prepared on behalf of the 1031 Like-Kind Exchange Coalition
Updated: May, 2022
Research conducted by EY provides insight into the economic activity supported by the I.R.C. Section 1031 like-kind exchange rules within the US economy in 2021. The research demonstrates the value of like-kind exchanges to the greater US economy, including employment and wage contribution, adding to GDP, and generating consumer spending.
The study measures the direct impact on taxpayers engaged in like-kind exchanges and the ancillary stream of indirect economic activity spawned by exchanges that involves suppliers to exchanging taxpayers and related consumer spending from income generated by employees and other businesses within the supply chain. Read the 2022 EY study here.
HIGHLIGHTS AND KEY FINDINGS – 2022 STUDY
SECTION 1031 LIKE-KIND EXCHANGES…
PROMOTE JOB GROWTH AND LABOR INCOME
Overall, Section 1031 exchanges supported 976,000 jobs and $48.6 billion of labor income in the United States during 2021.
CONTRIBUTE TO THE U.S. GDP
Section 1031 exchanges generated $97.4 billion in value-added to U.S. GDP in 2021.
CONTRIBUTE TO FEDERAL, STATE, AND LOCAL TAX REVENUE
Taxpayers engaged in like-kind exchanges, along with suppliers and related consumer spending generated approximately $13.1 billion in federal, state, and local taxes during 2021. Also, approximately $6 billion per year of additional income taxes were paid by exchanging taxpayers due to foregone depreciation (reduced deductions) on the replacement property acquired in the exchange.
REDUCE THE COST OF CAPITAL AND INCREASE INVESTMENT IN THE U.S. ECONOMY
Section 1031 allows faster and more efficient redeployment of capital for economic reasons, rather than for tax reasons. The greater investment creates more jobs, labor income and value-add at the taxpayer’s business. The investment follows to their suppliers and the businesses that rely on consumer spending, such as retail stores, restaurants, and entertainment.
REDUCE IMPEDIMENTS TO TRANSFERS, I.E. THE “LOCK-IN” EFFECT
Section 1031 encourages businesses of all sizes to relocate into properties that better meet their current and future needs. The movement promotes the highest and best use of property and more efficient business growth.
Download Newest Study (2022)
Full Report (2022): “Economic contribution of the like kind exchange rules to the US economy in 2021 – An update,” May 2022
Summary: Economic contribution of 1031 to US economy, May 2022
Slide Deck: Economic contribution of like-kind exchange rules to the US economy in 2021 – An update – Slide Deck – May, 2022
Infographic: EY Study: Economic Contribution of Like-Kind Exchange Rules in 2021