17 Apr IRS Extends 1031 Exchange Deadlines

A 1031 Exchange allows you to delay paying capital gains taxes during the tax year when you sell an investment property, and reinvest the proceeds from the sale in a similar replacement property (or properties) of equal or greater value.

Due to current challenges in closing certain real estate transactions, the IRS’ latest guidance has extended deadlines for 1031 like-kind exchanges in progress. 

• For exchanges in progress where the seller’s 45-day deadline for identifying a new property or the 180-day deadline for closing on a new one falls between April 1 and July 15, an extension is granted until July 15.

This is in addition to the previous announcement that taxpayers have until July 15, 2020 (versus April 15) to file and pay federal income taxes with no late filing penalties, late payment penalties, or interest due.  

For more details on the guidelines the IRS issued in the hopes of helping both individual and business taxpayers through the COVID-19 pandemic, visit this link: https://www.irs.gov/pub/irs-drop/n-20-23.pdf. 

Due to many performance factors affecting both buyers and sellers due to COVID-19, a timely close of escrow in today’s environment is proving to be a challenge. The National Association of Realtors® (NAR) crafted a letter to the Treasury Department advocating for the extension. The same goes for the 45-day period for identifying possible properties as exchange candidates.

“Without relief, missing these deadlines could invalidate the deferral treatment promised by section 1031 due to no fault of the taxpayer,” NAR said.

You can read more about IRS extensions here: https://www.irs.gov/newsroom/irs-extends-more-tax-deadlines-to-cover-individuals-trusts-estates-corporations-and-others and review the full text from Notice 2020-23 here: https://www.irs.gov/pub/irs-drop/n-20-23.pdf. 

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