April 15, 2020

Extended Deadlines for 1031 Exchanges and Opportunity Zone Reinvestments

2 min

On April 9, 2020, the IRS issued new guidance in the form of Notice 2020-23 (the "Notice"), which broadly provides taxpayers with a deadline extension until July 15, 2020, for a number of filings and other time-sensitive items. The Notice is yet another form of federal relief for Americans affected by the COVID-19 pandemic. The Notice provides for two deadline extensions with respect to like-kind exchanges under IRC Section 1031:

(i) The 45-day replacement property identification deadline has been extended to July 15, 2020, for taxpayers who entered into 1031 exchanges between February 16, 2020, and May 30, 2020

(ii) The 180-day exchange deadline has been extended to July 15, 2020, for taxpayers who entered into 1031 exchanges between October 4, 2019, and January 15, 2020.

Taxpayers should note that the Notice will not apply to any 1031 exchanges in which either the 45-day or 180-day deadlines expired before April 1, 2020.

Additionally, the Notice extends the deadline for taxpayers looking to reinvest realized capital gain into a Qualified Opportunity Zone. By way of background, the 2017 Tax Act introduced IRC Section 1400Z, which provides for, among other things, deferral of capital gain recognition for taxpayers who reinvest the proceeds from such gain into federally designated Qualified Opportunity Zones. To qualify for deferral, such reinvestment must normally happen within 180 days of realization of the capital gain. However, the Notice provides that any 180-day reinvestment deadlines falling between April 1, 2020, and July 15, 2020, are automatically extended to July 15, 2020.

Venable will continue to monitor the issuance of new guidance by the IRS in an effort to keep our clients abreast of any changes in the law during these turbulent times.