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Insight Alert: The New 1031 Exchange and Opportunity Zone Deadlines

April 27, 2020 CGS3 Coronavirus/COVID-19

On April 9, 2020, the Internal Revenue Service (IRS) issued Notice 2020-23, extending certain time-sensitive deadlines under the Internal Revenue Code. Like the IRS deadline extensions announced in late March, this new Notice follows President Trump’s March 13thdeclaration instructing Treasury Secretary Mnuchin to provide relief from tax deadlines for Americans adversely affected by the COVID-19 emergency.

In addition to listing the certain filing and payment obligations which have been extended from April 15, 2020 to July 15, 2020, the Notice extended periods related to 1031 exchanges and Opportunity Zones:

1031 Exchange Deadlines

  • If the taxpayer’s 45-day exchange period under Code Section 1031 would have otherwise expired on or after April 1, 2020: The Notice extends the 45-day exchange period to July 15, 2020.
  • If the taxpayer’s 180-day exchange period would have ended between April 1, 2020 and July 14, 2020: The Notice extends the 180-day exchange period to July 15, 2020.  Similar rules apply to reverse exchanges.
  • This can create unusual results. For example, if the relinquished property is sold on April 1, 2020, the 45th day would be May 16, 2020 and the 180th day would be September 28, 2020.  Under the Notice, the 45-day identification period is postponed to July 15, 2020 but the replacement property would need to be acquired by September 28, 2020.

Opportunity Zone Investment Deadlines

  • For the first time, the IRS is also extending the 180-day period after the disposition of an asset to allow taxpayers to defer the gain under the Opportunity Zone rules. Typically, a taxpayer would have 180 days to defer the gain associated with the sale of an asset by investing the gain in a Qualified Opportunity Zone Fund.
  • If the 180-day Opportunity Zone investment period would have expired between April 1, 2020 and July 14, 2020: The 180-day period has been extended to July 15, 2020.

As always, please contact us should you need assistance navigating these changes or the prior IRS and FTB deadline extensions and the potential impacts on your business.  Our COVID-19 Legal Task Force – comprised of multi-disciplined attorneys with expertise in real estate, finance, litigation, construction, tax, and creditor’s rights – is ready to assist you in developing a comprehensive and proactive response to these changes and other COVID-19-related issues affecting the commercial real estate industry.

CGS3 Insight Alerts are curated with you in mind.  They deliver focused, relevant, and timely information on trending topics to our clients, colleagues, and others in the industry.  Please note that they are intended for general informational purposes only, and should not be construed as legal advice for any specific situation. Always remember to contact an attorney to obtain advice with respect to a particular issue or problem