California Assembly Bill AB2640 Is Not Good For California Real Estate!

California State Assembly member Arambula (D-Fresno) has just introduced a new bill that is aimed at increasing tax revenue by limiting 1031 Exchanges, as well as 1033 Exchanges, as a tax deferral option in the State of California. The proposed Assembly Bill AB2640 would essentially eliminate an investor’s ability to defer his or her California state tax from the sale of rental or investment real estate through 1031 Tax Deferred Exchange transactions.  The Bill, if passed in its present form, will have a disastrous effect upon the California real estate market.

Contrary to the stated intent of AB2640, passage of the Bill would actually be a net tax reduction to the State of California and would further worsen its already critical fiscal position.  AB2640 would actually reduce the number of real estate transactions within the State of California, which would in turn would reduce the income earned, and therefore taxes paid, by Realtors©, Appraisers, Transaction Coordinators, Mortgage Brokers, Loan Officers, Escrow Companies, Title Insurance Representatives, 1031 Exchange Companies, etc.  The list goes on and on.

1031 Exchanges actually stimulate the economy by encouraging real estate purchase and sale transactions.  Investors continue to remain invested, real estate service providers continue to earn income and therefore pay income taxes, and our economy continue to grow. Without 1031 Exchanges, many transactions will be delayed or scrapped completely by investors.  

Let's not make our current woes worse by passing bad legislation.  AB2640 is not good legislation and is not good for California real estate business.