1031 Exchange and Opportunity Zone Investment Deadlines Extended

April 15, 2020
1031 Exchange and Opportunity Zone Investment Deadlines Extended
by Cameron A. Grant

On April 9, 2020, the Internal Revenue Service issued Notice 2020-23 extending certain deadlines provided by the Internal Revenue Code for taxpayers either engaging in Section 1031 like-kind exchanges or making investments in Qualified Opportunity Zone Funds.

If you have recently sold a property or are planning a sale in the near future, this extension may give you additional time to identify and then purchase replacement property as part of your 1031 like-kind exchange.  Here are the details:

• 45-Day Identification Period Extension. If you have an active 1031 Exchange with the last day of your 45-day identification period falling between April 1, 2020 and July 15, 2020 you get an automatic extension of your deadline to July 15, 2020.
• 180-Day Exchange Period Extension. If you have an active 1031 Exchange with the last day of your 180-day exchange period falling between April 1, 2020 and July 15, 2020 you get an automatic extension of your deadline to close on the purchase of replacement property to July 15, 2020.
• New 1031 Exchanges. If you sell a property prior to May 31, 2020, your normal 45-day identification period will end on July 15, 2020.
• Reverse Exchanges. If you are involved in a reverse or improvement exchange involving a “parking arrangement” (as described in Prox. 2000-40) you are also eligible for an automatic deferral of deadlines related to those exchanges if the deadlines fall between April 1, 2020 and July 15, 2020. The new deadline will be July 15, 2020, though it could be longer depending upon your particular circumstance.

Like the 1031 Exchange extension, investors in Qualified Opportunity Zones will have more time to reinvest proceeds from recently sold properties. 

• Opportunity Zone Reinvestment Deadline Extension. If your 180-day period for reinvesting proceeds from the sale of applicable property into Qualified Opportunity Zone Fund ends between April 1, 2020 and July 15, 2020, your deadline is now extended to July 15, 2020.

The language of Notice 2020-23 extending these deadlines is quite brief.  Our analysis of these extension may change if the IRS issues further guidance.  For now, the extensions look solid but you should discuss your particular situation with your attorney and tax advisor.

Attorneys in the Real Estate Group at Lyons Gaddis are available to advise you in relation to your tax-deferred exchange and opportunity zone questions.