April 16, 2020
By: Braxton Anthony
In a new set of guidelines regarding tax filing extensions due to COVID-19, the IRS published Notice 2020-23 on Thursday, April 9th extending deadlines for 1031 Exchanges and Opportunity Zone investors. If an investor (buyer or seller) had a deadline between April 1, 2020 and July 15, 2020, that deadline has now been extended to July 15th. If an investor had a deadline before April 1st, that deadline remained unchanged. This is a direct result of many real estate organizations and trade associations, including the National Association of Realtors, lobbying both the IRS and US Department of Treasury to extend deadlines due to the recent disruptions caused by the pandemic.
Feedback on the extension from real estate professionals is mixed as there could be some confusion. While Notice 2020-23 doesn’t exactly specify 1031 Exchanges or Opportunity Zone investments, tax professionals agree that they are covered under the broadening of the extension. The National Association of Realtors has recently praised the IRS for granting the extension, saying COVID-19 has left many small businesses and independent contractors vulnerable.
For those who are not familiar with a 1031 Exchange, an investor can defer paying capital gains taxes on the sale of an investment property as long as they acquire another investment property using the proceeds from the first property sale. The new property has to be identified within 45 days from the first property sale and the investor must close the transaction within a total of 180 days. Click here to find out more information regarding Opportunity Zones. As always, RCR recommends all new and current investors to consult their accountant and/or attorney to fully understand the tax advantages of a 1031 Exchange and/or Opportunity Zone investment.