IRS Extends 1031 Exchanges

July 13, 2024 | Posted by Jon Hegwood


On Thursday, April 9, in response to the COVID-19 pandemic, the IRS issued a notice of extension to – amongst others – 1031 exchanges deadlines.  This extension applies to both the 45-day identification period, as well as the 180-day closing period and grants relief to all taxpayers, including “trusts, estates, corporations, and other non-corporate tax filers”.

1031 investors whose 45-day identification deadline falls between April 1st and July 14th will now have until July 15, 2020, to identify potential replacement properties.

Similarly, 1031 investors whose 180-day deadline falls between April 1st and July 14th of this year will have until July 15, 2020, to complete their acquisitions.

The current IRS guidance does NOT provide relief to investors whose deadlines expire prior to April 1st, or after July 15th.

Preceding the IRS’ clarification, various prominent commercial real estate organizations, trade groups, qualified intermediaries and their advisors petitioned Steve Mnuchin and the U.S. Treasury to explore such an extension.  While the recent guidance is welcome news across the real estate industry, it came with no shortage of controversy. Concerns range from dissatisfaction with the relatively narrow timeline addressed, to the unclear nature in which the notice was drafted.

As capital gains, concerns and general uncertainty mount, the impact of the IRS’s guidance will be felt throughout the industry.  Notwithstanding the troubling underlying market conditions, newfound loan processing burdens placed on lenders via the CARES Act, shelter-in-place orders, and the multitude of ancillary limitations experienced by many, the 1031 market has been highly stressed as both the timeline and pace of closings has slowed.  While no additional update or clarification is immediately expected, many investors and advisors continue to monitor the situation, as fluid and volatile as it is, shall further guidance result.