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1031 Exchange Disaster Relief Extensions Do Not Apply for COVID-19

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IRS Provides Clarity On the Impact of Notice 2020-23 for Taxpayers Engaged In a 1031 Exchange

On April 9, 2020, the IRS Issued Notice 2020-23, an update to Notice 2020-18, “Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic.”

Taxpayers who were currently engaged in a 1031 exchange with a 45-Day Exchange Period or 180-Day Exchange Period deadline between April 1 and July 15, 2020, were given an automatic extension to July 15.

Unfortunately, this notice did not provide clarity for those taxpayers engaged in an exchange with deadlines that fell outside of that window. Many were left wondering whether they were entitled to any relief under Section 17 of Rev. Proc. 2018-58, which would have potentially given them a 120-day extension. The ambiguity of the notice created a great deal of confusion and debate over whether or not Section 17 applied.

1031 Exchange Extensions – Disaster Relief Does Not Apply

On August 11, 2020, the IRS finally published clarification that the 120-day extensions available for typical disaster relief DO NOT APPLY to the COVID-19 disaster relief granted in Notice 2020-23. The IRS confirmed that the sole relief granted for like-kind exchanges was the stated limitation in Notice 2020-23, that only the §1031 deadline that fell between April 1, 2020, and July 14, 2020, could be extended to July 15, 2020.

Click here for more information on this recent publication.

While this is certainly not good news for taxpayers who were hoping to take advantage of the extensions afforded to taxpayers under Section 17 of Rev. Proc. 2018-58, we now have a clear answer.

Please contact Midland 1031 if you have any concerns or questions regarding your exchange.