IRS Notice Extends 1031 Exchange Deadlines

By Scott R. Saunders

Many real estate investors seeking tax deferral in a 1031 exchange or contemplating a sale of an investment property in the near future and intending to perform a 1031 exchange have been anxiously awaiting guidance from the IRS on the impact of the COVID-19 pandemic on the time deadlines in an exchange. On April 9, 2020 the IRS issued Notice 2020-23. This Notice extended many deadlines for real estate investors affected by the COVID-19 outbreak including Section 1031 exchange time deadlines.

This Notice provides that any person performing a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) of the Procedure and Administrative Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action), is an Affected Taxpayer. This includes the 45-Day Identification and 180-Day Exchange Period deadlines in both deferred and safe-harbor reverse 1031 exchanges.

Therefore, pursuant to Notice 2020-23, if the end of an investor’s 45-day Identification Period or 180-day Exchange Period in a deferred exchange or the parallel periods in reverse exchanges under Revenue Procedure 2000-37 falls between April 1 and July 15, the applicable period is automatically extended to July 15, 2020, unless the investor chooses to opt-out of the extensions.  Real estate investors who choose to opt-out of these extensions should notify their qualified intermediary (QI) in writing as soon as possible.

In the absence of further IRS guidance, only deadlines currently scheduled to occur between the dates of April 1 – July 15, 2020 are extended. Notice 2020-23 does not address deadlines that fall before or after this specific time period or, most importantly, identification or exchange completion periods that ended before April 1 or pending exchange periods that end after July 15. In addition, this Notice is different from many previous IRS Disaster Relief Notices and does not provide clear answers to other deadline related issues.

This Notice does not reference Section 17 of Revenue Procedure 2018-58, which provides an extension of 120 days or until the date specified in the Notice, whichever is later. It is uncertain and not clear in Notice 2020-23 if the 120-day deadline extension provided in previous IRS Disaster Relief Notices applies.

Finally, some real estate investors were seeking IRS extensions of dates falling after the date of the FEMA and Stafford Act declaration on March 13, 2020. Other investors were hoping for a deadline extension to apply from the date of the FEMA disaster declaration on January 20, 2020. At this point in time, taxpayers should make decisions based only upon known IRS guidance.

It is unknown whether additional guidance will be released by the IRS addressing these and other uncertain issues. Every investor should consult with their own legal and/or tax advisors regarding the tax consequences of any specific 1031 exchange transaction.

Asset Preservation is a leader in the §1031 exchange industry and provides the most up-to-date information. For more information on the author, Scott Saunders, click this link to view the professional biography. Please call toll-free: 800-282-1031 or email: scott@apiexchange.com if you are interested in publishing this article or would like others on the subject of investment real estate and §1031 tax-deferred exchanges.

Scott R. Saunders
Sr. Vice President
Asset Preservation, Inc.

84 Highway 105, Suite A
Palmer Lake, CO 80133
Toll-Free: (888) 531-1031
Local: (719) 481-9788
Fax: (704) 943-5675
scott@apiexchange.com
apiexchange.com

National Headquarters
(800) 282-1031
Eastern Regional Office
(866) 394-1031

A Stewart Information Corporation subsidiary (NYSE: STC)

Asset Preservation, Inc. (API) is a qualified intermediary as defined in the regulations under Internal Revenue Code § 1031. Neither API, it’s officers or employees are authorized or permitted under applicable laws to provide tax or legal advice to any client or prospective client of API. The tax-related information contained herein or in any other communication that you may have with a representative of API should not be construed as tax or legal advice specific to your situation and should not be relied upon in making any business, legal or tax-related decision. A proper evaluation of the benefits and risks associated with a particular transaction or tax return position often requires advice from a competent tax and/or legal advisor familiar with your specific transaction, objectives and the relevant facts. We strongly urge you to involve your tax and/or legal advisor (or to seek such advice) in any significant real estate or business related transaction.

If this message was sent to you in error or if you wish to be removed from our email list, please do one of the following: reply to this email message, call us toll-free at 866.713.1031, email us at: e-newz@apiexchange-enewz.com or notify us in writing to: Asset Preservation, Inc., 1420 Rocky Ridge Drive, Suite 100, Roseville, CA 95661, Attn: Marketing Dept. © 2018 Asset Preservation, Inc. All rights reserved.