1031 Exchange Extension - Who It Applies to and What It Means


Due to the Coronavirus Pandemic the IRS has issued guidance extending the time periods for individuals currently in an exchange. IRS Notice 2020-23 provides that those performing time-sensitive actions listed in Revenue Procedure 2018-58 due to be performed on or after April 1 and before July 15, 2020 are an Affected Taxpayer. Revenue Procedure 2018-58 permits the extension of IRC §1031 exchange deadlines.

Notice 2020-23 extends any 45-day or 180-day deadline that falls between April 1 and July 15, 2020 to July 15, 2020.

This is a great step in affording relief to those Exchangors who have been affected, but at this point does not apply to any exchange deadlines prior to April 1, 2020. The industry is seeking clarification from the Treasury Department and the Internal Revenue Service on this Notice. Equity Advantage will continue to monitor the situation and provide additional guidance as new information comes forward.

Practice Tips

This is an optional extension, an Exchangor is not required to extend their exchange timelines.

Example: John closed his relinquished property on April 1, 2020 but then decides he does not want to move forward with the exchange. If John does not identify any replacement properties he may cancel the exchange and receive the 1031 funds after the initial 45-day identification deadline of May 16, 2020.

If an Exchangor’s 45-day identification period is extended to July 15th, the 180th day of the exchange is not also extended beyond the initial 180-day deadline.

Example: John closed his relinquished property on March 1, 2020. His 45-day identification date is April 15, 2020. Because of the extension, John has until July 15, 2020 to identify replacement property. The 180th day of John’s exchange is August 28, 2020, this date is not extended.

If an Exchangor’s 180-day deadline is extended to July 15, the initial 45-day identification deadline is not impacted. The Exchangor must close on an identified property to complete the exchange.

Example: John closed his relinquished property on December 15, 2019. His 45-day identification date is January 29, 2020. John’s 180-day deadline is June 12, 2020. John has until July 15, 2020 to complete his exchange but must close on a property identified within his initial 45-day identification period. John cannot change identified properties as the 45-day identification deadline was before April 1, 2020.

Extension Application Table


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