Why Hilton and Other Hotels May Not Like This Joe Biden Tax Proposal
published 30.07.2020 21:30
Despite the luxury patina to that exchange, Percelay — who uses the provision in his own real estate business — and real estate analysts argue this is a part of the tax code that benefits more than financially savvy real estate investors.
The hotel company — before it spun out its real estate holdings into Park Hotels Resorts — deferred its capital gains taxes and used the profits in acquiring three Waldorf Astoria-flagged hotels in Florida, a Hilton in Orlando, and the Parc 55 hotel in San Francisco.
The tax move is tied to transactions like Hilton’s nearly $2 billion 2014 sale of the Waldorf Astoria in Manhattan, where the company deferred taxes on profits by using the proceeds to buy five luxury hotels across Florida and California.
Presidential candidate Joe Biden wants to eliminate the 1031 exchange, a tax provision popular with hotel owners looking to trade up properties and defer or avoid capital gains taxes incurred along the way.
There is also the grim economic reality that 1031 exchanges only provide tax benefits if a property owner makes a profit on a sale.