ADISA responded to the U.S. Department of the Treasury’s request for comment on Section 199A of the IRC, describing how confusion may result as an unintended consequence in the IRS’ definition of Unadjusted Basis Immediately After Acquisition (UBIA).

ADISA has been involved in research into, and communication about, LKEs at the national level. And our role as an association of investment professionals lends a unique perspective on Like-Kind-Exchanges and in particular, how potential/proposed changes in the Section 1031 tax treatment could affect investors.

In its comments, ADISA urges caution when drafting rules which may affect Like-Kind Exchanges, especially with respect to Code Section 199A. The calculation of Unadjusted Basis Immediately After Acquisition (UBIA) following a LKE is an area which implementing Code Section 199A may be affected. ADISA believes that the guiding principles of calculating UBIA after an LKE should consist of the following:

1. The treatment of UBIA should be consistent with the treatment already provided by Congress for the underlying transaction; and
2. The calculation of UBIA should be neutral to the taxpayer as a result of having engaged in an alternative transaction such as an LKE.

From our perspective, we know and understand the more macro national effects of tinkering with Code Section 1031, but to what effect this seemingly minor change may have on real estate owners, renters and investors deserves investigation. ADISA stands ready to assist in any research effort.

Members of the drafting committee for the comment letter were Larry Sullivan, Passco Companies; Deborah Froling, Kutak Rock; Catherine Bowman, The Bowman Law Firm; and John Harrison, ADISA Executive Director. The letter was signed by current ADISA President Keith Lampi, Inland Private Capital Corporation.

View the letter in its entirety here.