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Commentary and Analysis Regarding Colorado Law

Did 2017 Tax Code Changes Eliminate 1031 Exchanges of Ditch Stock?

1031 exhange

Since the passage of the 2007 Farm Bill, buyers and sellers of certain water rights have enjoyed the ability to use tax deferred exchanges under Section 1031 of the Internal Revenue Code.  Recent changes to the tax code, however, deleted any reference to mutual ditch or irrigation company stock from the definintion of qualifying “like kind property.”  None the less, the IRS will still allow exchanges involving ditch stock provided that your state’s laws consider such stock as real property.

Following the passage of the 2007 Farm Bill, Internal Revenue Code §1031(i) specifically provided that mutual ditch or irrigation company stock could be used for a tax deferred like kind exchange for real property used in a trade or business or held for investment purposes. As a result, the gain from the sale of eligible mutual ditch company stock could be deferred if the other requirements of §1031 were met.  Eligible stock was defined as any stock in a mutual ditch, reservoir, or irrigation company, as described in Code § 501(c)(12)(A). That section required at least 85% of the revenue into the company be from member assessments.

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Colorado Flood Relief Bill in Congress


Submitted by Jeff Kahn

On November 19th, Longmont’s Sean Cronin testified before the Senate Committee on Finance, Subcommittee on Taxation and IRS Oversight’s hearing entitled “Tax Relief after Disaster: How Individuals, Small Businesses, and Communities Recover.”  Mr. Cronin is the Executive Director for the St. Vrain and Left Hand Water Conservancy District.  (Watch Mr. Cronin’s testimony) He spoke to the challenges faced by farmers and mutual ditch companies as they work to rebuild important water infrastructure damaged by the 2013 flooding and the benefits that would be offered by adoption of the National Disaster Tax Relief Act of 2014., currently under review in the House and Senate. The full text of Mr. Cronin’s testimony is available here.

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Colorado Water Law Legislation Update


Submitted by Jeffrey J. KahnProposed Water Legislation and Ballot Initiative

Legislation:  The 2014 Colorado Legislative Session convened on January 8th and several pending bills appear headed for enactment, including:

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