Washington, D.C. — Last week, House Republicans released their tax reform bill, which includes a major change to Section 1031 or “Like-Kind Exchanges.” Currently, Section 1031 defers the taxation of gains on the exchange of property as long as the property is held for productive use in a taxpayer’s trade or business. This allows for the gains made on old property to be invested in new property.
However, the bill modifies Section 1031 to only apply to “real property,” thus excluding investments in personal property such as precious metals coins and bullion from the U.S. Mint. In the view of the Precious Metals Association of North America (PMANA), this is an anti-growth provision that will hurt jobs and, in turn, weaken our economy if signed into law — in other words, forcing taxpayers to recognize a gain on continuing investments that support economic growth is bad for the economy.
“While some wrongly label this as a tax shelter, the reality is quite different,” said Scott Smith, president of PMANA. “Section 1031 promotes economic growth because it allows taxpayers to redeploy capital and generate much-needed revenue for the U.S. Mint. When the U.S. Mint generates revenue and increases production, the benefits trickle down the precious-metals supply chain to manufacturers, recyclers, and refiners,” Smith continued. “In the end, Uncle Sam should not punish responsible investors for making smart decisions that support families and the economy,” he said.
In the coming days, PMANA will be meeting with key members of Congress to restore Section 1031 personal property investments in the tax reform bill.