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UP / Thumb of Michigan | At what point do you pay the capital gains and move on? Does the law need to be that you can avoid capital gains on a like acreage, instead of a like $ amount? I dunno.
On your first point- paying the cap gains happens often. Used to happen even more frequently, but stepped up basis helped stop limit the need to do so. In some cases.
And there are times when its just as easy to pay the tax on the gain and move on. Everyone is going to be different. Depending on about 100 or 200 different scenarios, the capital gains tax might be the most attractive tax to pay vs another alternative.
To your second point: I have absolutely no idea whatsoever how anything size related could ever be instituted to a 1031 transaction rule. I once traded 116 acres of farmland into a 4 acre parcel, with the income potential much greater on the 4 acre parcel.
Using dollars as the basis is the only thing that makes sense- inflation has affected (most likely) the sold property and the replacement property. Which leads back to capital gains theory on gains and why many are against taxing that. To oversimplify, doesn't matter how well you plan and manage anything, you can't really control the rate of inflation. Yet the people who kind of can want to get paid for that ability. Every time an asset is sold for a "profit" which isn't always true profit. Its an inflated value is all.
HOWEVER- I think that some of the biggest misconceptions on this particular site are 2 fold.
The first one is that farm land is involved in many of the 1031's that occur annually. In reality, I don't know if farmland would even be much of a blip on the screen in the big picture. The amount of real estate (or other assets) sold and bought with 1031 is pretty big number, very little of it farm land.
The second misconception often quoted is that someone using 1031 can pay ANYTHING for replacement property. Which is absolutely not true. Again, every situation is different: but every penny paid over true cash value for a replacement property makes just paying on the gain look more attractive.
Edited by pat-michigan 5/20/2026 08:01
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1031 rules need to change
