On April 9, the IRS released Notice 2020-23. The Notice pertains to Section 1031 like-kind exchanges to defer capital gains tax on the sale of real property. Under the Notice, the 45-day identification deadlines and 180-day exchange deadlines that fell between April 1, 2020 and July 15, 2020 are automatically extended to July 15, 2020.
This Notice is a welcome action to adapt to difficult times. With so much of the world shut down, the ability to identify potential replacement properties is increasingly difficult, making the 45-day deadline feel tighter than usual. There are fewer properties available on the market, and potential investors, especially those out-of-state, can no longer travel to sites to investigate. Further, many closings have been hindered by practical considerations, potentially pushing parties to the edge of their 180-day deadline.
Two cautionary notes: first, it is unclear if post-July 15 deadlines will be adjusted. For example, an exchanger with a 45-day deadline of early April may have the deadline extended to July 15 but still be required to close the sale within the initial 180-day period (mid-August). If and until the IRS issues supplemental guidance about post-July 15 extensions, identifying late may force a quick turnaround to close. Second, parties to a transaction already under contract to close by a certain date should promptly begin negotiating an amendment to the contract if they wish to take advantage of having more time. Keep an eye on Ear to the Ground to stay updated on this topic and others.