What does that mean for real estate professionals and their clients?
A 1031 exchange allows the seller of business use or investment property to defer the gain when exchanging for another business use or investment property. An exchange is much like the sale of one property followed by the purchase of another linked together by paperwork completed within a certain period of time. What makes the old property and new property “like-kind” is its use not the property type. Any type of property used in a trade or business or held for invest will qualify for 1031 tax-deferral treatment.
An exchange is allowed under Section 1031 of the federal tax code, but the tax deferral is not allowed in the commonwealth. Act 53 was signed by Gov. Tom Wolf on July 8 and finally brings 1031 recognition to Pennsylvania effective Jan. 1, 2023.