IRS Agrees to ALTA Request to Extend 1031 Deadlines
April 16, 2020
On April 9, 2020, the internal Revenue Services (IRS) issued Notice 2020-23 Providing Additional Relief for Taxpayers Affected by the COVID-19 Pandemic, which extends deadlines for 1031 like-kind exchanges.
The notice extends the 45-day identification period and the 180-day exchange period for taxpayer/exchangers whose deadlines were due on or after April 1, 2020. The deadline for those taspayers to identify replacement property and/or acquire replacement property is now July 15, 2020. It is important to note that there is no retroactive effect if the 45-day identification deadline and 180-day exchange period were before April 1, 2020.
In March, ALTA and 19 other groups requested the Treasury extend the deadlines to identify replacement property and/or complete 1031 exchanges.
Under the most common type of like-kind exchange, a taxpayer sells a relinquished property and deposits the proceeds with a Qualified Intermediary. The taxpayer subsequently has 45 days to identify replacement property and 180 days to complete a transaction. Failure to meet the strict deadlines for identifying trade properties and then actually closing on a replacement property result in immediate recognition of capital gain income that could otherwise be deferred.
“Identifying properties for trade purposes requires travel and a confidence in both the expected cash-flow stream and the value of potentially acquired property,” the letter states. “Closing on an identified property requires these same conditions plus extensive due diligence by the buyer, lender, and other third-party contractors. All of these necessary steps are currently unfeasible due to travel restrictions, quarantine, properties being locked down, and office closures of title / escrow companies and governmental recording offices.”
Contact ALTA at 202-296-3671 or [email protected].