Nareit and other real estate groups have sent a letter to the Treasury Department and Internal Revenue Service (IRS) regarding the application of the section 199A deduction for qualified business income for property acquired through a section 1031 like-kind exchange.
According to the letter, Treasury should interpret “unadjusted basis immediately after acquisition” in a manner that would neither inhibit nor impair the economics of a taxpayer’s decision to engage in a section 1031 like-kind exchange.
For purposes of determining the wage and capital limitation of section 199A, Treasury should interpret “unadjusted basis immediately after acquisition” as the acquisition cost of qualified replacement property, regardless of whether acquired through purchase or like-kind exchange, the letter said.