It is estimated that AB 2640 is at least a $350 million tax increase on our industry.
A recently introduced piece of legislation in California is causing much consternation in the real estate industry. If enacted, AB 2640 (Arrambula; D – Fresno) would repeal Internal Revenue Code Section 1031, for California income tax purposes. The repeal would be effective for taxable years beginning on or after January 1, 2010. Besides Section 1031, AB 2640 would apply to and would repeal non-recognition treatment for, among others, involuntary conversions, for certain seller reacquisitions of real property and for transfers of property between spouses.
If enacted, the bill could significantly increase the California income tax of taxpayers who engage in previously tax-deferred transactions. Also, because AB 2640 creates a divergence between the Federal and the California income tax laws that apply to those taxpayers, enactment would probably increase the complexity and cost of preparing their Federal and California income tax returns.
CBPA is coordinating an industry-wide response to this measure, building a coalition to oppose, and will fight through the legislative process to stop this proposal. Read AB 2640 (Arrambula).
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