Right now a lot of clients are terrified of capital gain rate changes and the loss of 1031 rollovers for real estate. For whatever reason - McConnell et all seem more worried about estate tax reform - but the thing which can effect commerce are these increased rates and the inability to defer taxes with a 1031 rollover.
If 1031 is eliminated and the capital gain rates are kicked up to 40%, I can't imagine commercial real estate transactions doing anything but coming to an almost complete freeze. Tonight and tomorrow I've been called in on an urgent basis to craft language on a real estate transaction in the few hundreds of millions range that will permit the Seller to back out if the tax laws change adversely between now and closing.
Solution? Move cap gains rate up to 28% (the Reagan era rate). Have a partial tax (10-14%) on 1031s with a partial basis step up for seller/exchangor. But - get rid of capital loss carryovers and get rid of component depreciation - it is a fraud.
Sort of serious here - if a moderate approach isn't taken (and I think the above is moderate)- the risks in the system could be significant. Owners - lenders - really get hurt. And who knows if their doesn't pour over into the residential market - even single family detached.