IRS Notice 2020-23 Offers Extended 1031 Exchange Deadline Relief

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Sellers utilizing Section 1031 of the tax code have enjoyed the benefit of deferring capital gains on the sale of property by “rolling over” the capital gains from one like kind property to the next, commonly referred to as a 1031 Exchange.  Last week, the IRS issued Notice 2020-23 (that updates Notice 2020-18, “Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic”) to further extend filing deadlines. If the requested actions are handled within the timeline, sellers who initiated 1031 Exchanges prior to April 1, 2020 now have time to identify their replacement properties and complete their exchange.

The 1031 Exchange has two very important actions a seller must take, with each of these actions noted as a “Specified Time Sensitive Action.” These include:

1.) Within 45 days of the sale of the property the Seller must identify a replacement property.
2.) Within 180 days of the sale the Seller must purchase the replacement property. 

Notice 2020-23 provides that a Seller now has until July 15, 2020 to perform all Specified Time Sensitive Actions that are due to be performed on or after April 1, 2020, but before July 15, 2020.  It is important to note that the IRS has extended the Specified Time Sensitive Action deadlines in areas affected by natural disasters and it is likely that additional guidance will be issued regarding 1031 Exchange deadlines in the near future.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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