Late last week, the IRS issued guidance in response to COVID-19 that potentially extends the 1031 exchange deadlines for taxpayers. This unprecedented guidance has resulted in a lot of additional questions and confusion. In this article, we wanted to highlight a complex 1031 exchange situation that resulted from this ruling.
Properties No Longer Available
One of our clients submitted their identified properties on March 23, 2019. Now, two of the properties are no longer available due to the coronavirus pandemic. What are the implications of the new deadline changes?
This is a really pertinent question because people that started their exchanges whose identification period ended before April 1 are extremely disadvantaged because many sellers of properties that were identified have pulled their property off the market because they can't show them during the Covid pandemic because their tenants won't let people into the units. Furthermore, they're afraid to sell their properties in down markets so they're pulling them off the market.
IRS Notice 2020-23 appears to only postpone any 45-day or 180-day deadline that occurs between April 1 and July 15, to July 15, 2020.
If your replacement property identification period ended prior to April 1, then there is no change or extension to the identification period; however the 180-day exchange period could be extended if your exchange period would normally end after April 1 and before July 15.
This is still a fluid situation and more information and details may be released by the IRS. We are continuing to monitor the situation.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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