Great News if You are Conducting a 1031 Tax Deferred Exchange in the Time of Covid-19

If you have a deadline to purchase a property to complete a like-kind exchange, this is a challenge given the mandate that Realtors not show property. Even though Real Estate transactions are deemed essential by some municipalities (including Ventura County where many horse properties are located), the restrictions make it especially challenging to adhere to the 45 day deadline to identify the property to be purchased.

Great News – IRS extends deadlines to complete 1031 Tax Deferred Exchanges

posted April 10, 2020 by

Whitney Brennan
Vice President
Investment Property Exchange Services, Inc.
whitney.brennan@sis.ipx1031.com
(916) 806-1468 – Mobile
www.ipx1031.com/brennan

Late yesterday, the IRS issued Notice 2020-23, extending a variety of deadlines, including 1031 deadlines. Although the Notice is confusing, because it is not written like the typical Disaster Relief Notices, this Notice extends any 45-day or 180-day deadline that occurs between April 1 and July 14, to July 15, 2020.

We are working with other real estate professionals to convince the IRS to change the start date from April 1st to January 20th so that the extensions apply to more taxpayers.

Please note that this is different from the usual disaster extension that provides for an extra 120 days.

Here are two examples to illustrate the current extension.

  • Example 1: Exchange began April 1, 2020. 45th day is May 16, which would be extended to July 15, 2020. Taxpayer must still close on replacement property by Sept 28, which is the 180th day; because Sept 28 is after the last day of the disaster period (July 15).

  • Example 2: Exchange began Dec 31, 2019, 45th day is Feb 14, 2020. ID period is not extended because it is before April 1. The 180th day is June 28, which would be extended to July 15, 2020.

As always, exchangers should speak with their tax advisers to determine if they are eligible for an extension. I have also attached our Brief Exchange on Disaster Relief Deadline Extensions as well as a Deadline Extension Summary and the Deadline Extension Certification form that are available on WebQI if you have affected Exchangers.

This remains a fluid situation and we will provide any clarification or changes that the IRS issues, if any.

Read more about disaster relief here: IPX1031 Disaster Relief Deadline Extensions information and IRS Disaster Relief Notices.

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