1031 Extension Calculator Due to Covid-19
In April of 2020, the IRS issued 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 was a debate as to the number of extra days an affected taxpayer might receive. The IRS did not issue prompt guidance despite requests for clarification.
Some experts contended that Notice 2020-23 controlled 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. The way the Notice was written indicates that it was meant to apply on its own to time sensitive actions, including those listed in Rev. Proc. 2018-58.
Other experts contended 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.
As of September 2, 2020, the IRS has not provided any guidance as to whether taxpayers who were past their 45-day identification period prior to the dates in Notice 2020-23 could change their previously identified properties. Historically, this amendment to a written identification after the deadline is only allowed if an identified property was “substantially damaged” by the disaster.
Pursuant to the Notice itself, if a taxpayer sold between Jan. 17, 2020 and Feb. 16, 2020, they would not receive an extension of either the 45-day ID period or 180-day period in which to buy replacement property. See More
On August 11, 2020, almost a month after the July 15th deadline passed, the IRS issued a CV-19 FAQ stating that “Notice 2020-23 did not extend the relief provided in section 17 of Rev. Proc. 2018-58 to taxpayers engaging in section 1031 like-kind exchanges.Therefore, the section 1031 deadlines addressed in items 26 and 27 of section 6 of Rev. Proc. 2018-58 that fall on or after April 1, 2020, and before July 15, 2020, are not extended beyond July 15, 2020.”
For additional information on the issue, please read our article: It’s a Struggle to Understand the IRS’ Guidance for 1031 Extensions and summary of the August 11, 2020 guidance/FAQ. Legal 1031 Exchanges Services, LLC is providing this CV-19 disaster extension calculator and articles which discuss the decisions that taxpayers transacting an exchange during the pandemic were faced with as informational reference material only. In no way are we warranting or promoting the validity of any position or legal argument related to this issue.
1031 Extension Calculator Due to Covid-19
The above disaster extension calculator assumes that the 120-day extensions provided for in Rev. Proc. 2018-58, Section 17 apply. In addition, please note that Rev. Proc. 2018-58 does not provide that a taxpayer is able to re-open an expired identification period unless the disaster has substantially damaged one or more of the identified properties.
Please also consult with your tax advisor to address any tax filing requirements which could potentially reduce your original or extended 45-day or 180-day period. Taxpayer may need to file for an extension of their tax filing deadline. If your 1031 deadline falls on a weekend or holiday it does not roll over to the next business day.
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.