1031 Extension Calculator Due to Covid-19

1031 Extension Calculator Due to Covid-19


1031 Extension Calculator Due to Covid-19

The IRS recently issues Notice 2020-23 which provides an extension for some 1031 exchange taxpayers due to the Covid-19 pandemic. Unfortunately, due to some unclear language used in the Notice, there is a debate as to the number of extra days a taxpayer might receive.

Some experts contend that Notice 2020-23 controls for 1031 exchange taxpayers and extends either their 45-day identification period, or 180-day period in which to purchase replacement property, until July 15, 2020, so long as the last day of either of those periods falls between April 1, 2020 and July 15, 2020.

Other experts contend that Notice 2020-23 merely enables the provisions of Rev. Proc. 2018-58 and provides for an extension if either the 45-day or 180-day time deadline for an exchange falls between April 1 and July 15, allowing taxpayers to extend either or both of those periods for an extra 120-days.

The IRS has not provided any guidance as to whether taxpayers who are past their 45-day identification period could change their previously identified properties. Historically, this is only allowed if an identified property was “substantially damaged” by the disaster.

If a taxpayer sells between Jan. 17, 2020 and Feb. 16, 2020, they will not receive an extension of either the 45-day ID period or 180-day period in which to buy replacement property.

Accordingly, since there are two positions to consider, taxpayers should make sure to consult with their tax or legal advisors before making a decision. It is our hope that the IRS will provide additional guidance which will provide a set of rules for taxpayers.

Please consult with your tax advisor to address any tax filing requirements which could potentially reduce your 180 day period. If your date falls on a weekend or holiday it does not roll over to the next business day.

For more information please read our article: It’s a Struggle to Understand the IRS’ Guidance for 1031 Extensions

Legal 1031 does not provide tax or legal advice, nor can we make any representations or warranties regarding the tax consequences of any transaction. Taxpayers must consult their tax and/or legal advisors for this information. Unless otherwise expressly indicated, any perceived federal tax advice contained in this article/communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

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