On April 9, 2020, the IRS issued Notice 2020-23 (the “Notice”), which extends additional tax deadlines to cover individuals, estates, corporations and others. The Notice also provides relief with respect to certain “Specified Time-Sensitive Actions” that are due to be performed on or after April 1, 2020, and before July 15, 2020. For purposes of the Notice, the term “Specified Time-Sensitive Action” includes certain deadlines for taxpayers to identify property and complete a 1031 exchange. It also includes the prescribed timing to make qualified opportunity zone investments.
1031 Identification and Exchange Deadlines
Section 1031 of the Code allows investors to defer paying capital gains taxes on investment property sales by reinvesting the proceeds into a similar investment property within a specified timeframe. After an investment property is sold, investors typically have 45 days to identify the replacement property and 180 days to complete a transaction. Pursuant to the Notice, for taxpayers that have a like-kind exchange currently in process:
- If the 45-day identification period expires on or after April 1, 2020, and before July 15, 2020—the taxpayer may have until July 15, 2020, to complete the identification; or
- If the 180-day exchange period expires on or after April 1, 2020, and before July 15, 2020—the taxpayer may have until July 15 2020, to complete the exchange (assuming the due date of the return (including extensions obtained) is not before July 15, 2020).
Qualified Opportunity Zone Investment Deadlines
The Tax Cuts and Jobs Act of 2017 established the program to stimulate economic development in distressed low-income communities by offering potentially significant tax benefits to investors that make long-term investments in these areas. Capital gains qualify for beneficial treatment under the law as long as they are invested within 180 days of the gain being realized.
Under the Notice, Taxpayers now have until July 15, 2020, to elect to invest capital gains into a qualified opportunity fund if the original 180-day period expired on or after April 1, 2020.
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