IRS Extends Deadline for Completing 1031 Exchanges due to COVID-19

deadline for 1031 exchanges
   

Last Thursday, April 9, 2020, the IRS released Notice 2020-23, further broadening and clarifying the deadline extensions related to the COVID-19 pandemic. Of particular note in this announcement were additional extensions to July 15th for making quarterly estimated tax payments (including Q2 payments usually due June 15th) and certain “time-sensitive actions,” including the following:

  • Filing amended tax returns
  • Filing petitions in the Tax Court
  • Identifying potential replacement property for like-kind exchanges (1031 exchanges) that began prior to the President’s emergency declaration. This is normally a 45-day window.
  • Closing on the purchase of replacement property for like-kind exchanges (1031 exchanges) that began prior to the President’s emergency declaration. This is normally a 180-day window.

For all actions listed above that had an original due date falling between April 1st and July 14th, the due date has been automatically extended to July 15th.

As an example, if you sold a property in a 1031 exchange on November 1st, 2019, you would usually be required to close on the replacement property within 180 days (for this example, April 29th). Since the last day of the 180-day period falls between April 1st and July 15th, you would now have until July 15th to close on the replacement property and complete the 1031 exchange (provided you had appropriately identified the replacement property within the 45-day identification period). Note that this extension of the like-kind exchange period is not explicitly mentioned in IRS Notice 2020-23, but the notice extends any “time-sensitive action listed in…  Revenue Procedure 2018-58…” Revenue Procedure 2018-58 does explicitly reference the 1031 exchange periods.

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April 13, 2020