We reminded you in a previous post of the 1031 Exchange deadline extensions provided by the U.S. Treasury and IRS as a result of the challenges exchangers faced due to the COVID-19 lockdowns. The extensions were identified in IRS Notice 2020-23 and stipulated that 1031 exchangers with 45-day identification period or 180-day exchange period deadlines that fell between April 1 and July 15, 2020 would have automatic extensions to July 15, 2020.
The following examples help illustrate how the extensions apply for both the 45-day and 180-day deadlines:
John Smith’s 1031 Exchange began on April 1st, 2020 and his 45-Day Identification Period deadline is May 16th. Under Notice 2020-23, John’s new deadline is now extended to July 15th, 2020 providing him additional time to find the right replacement property. John still must close on the replacement property by Day 180 of their Exchange which is September 28th, because that date falls after his July 15th extension date.
Sarah Jackson’s 1031 Exchange began on December 15th, 2019. Her 45-Day Identification Period deadline was January 29th. Because Sarah’s ID replacement deadline occurred prior to April 1, 2020, no extension applies. But since her 180-day Exchange Period Deadline occurs on June 12th, she benefits from the Notice’s extension rules and now has until July 15, 2020 to complete her exchange.
At this point, the U.S. Treasury has not issued any additional relief or extension notices, so you should consider the July 15, 2020 date as definitive. Because of that and depending on where you are in the process with your exchange, you may still be experiencing a time crunch as you now have less than three weeks to work with.
Many of our clients facing similar challenges have been able to save their exchanges by using a Delaware Statutory Trust (DST) structure. Not only does the DST meet the “like kind” property requirement to qualify for a 1031 Exchange, but it also enables exchangers to invest in institutional quality properties and to close within 2-3 days.
For more information, please feel free to download our helpful document, Understanding the New IRS Deadline Extensions for 1031 Exchanges.
Please feel free to contact our team if you need more information. We can help answer questions you have about your exchange and we can assist with your exchange needs.