On April 9, 2020, in response to the ongoing COVID-19 pandemic, the Secretary of the U.S. Department of Treasury (the “Secretary”) and the Internal Revenue Service (“IRS”) released Notice 2020-23 which provides key procedural relief to affected taxpayers engaged in Section 1031 Like-Kind Exchange transactions and those investing in Qualified Opportunity Funds.
1031 Like-Kind Exchanges
The Notice provides an extension to July 15, 2020, for affected taxpayers performing time-sensitive acts under the internal revenue laws. Stated differently, if the deadline to perform the time-sensitive act expired or would otherwise expire, between April 1, 2020 and July 15, 2020, then the act will be treated as timely if performed no later than July 15, 2020. This extension applies to both the 45-day identification period and the 180-day exchange period.
It is important to note, however, that even if the taxpayer’s 45-day identification period is extended to July 15, 2020 under the Notice, the mentioned relief provided will not extend the 180-day exchange period if the expiration of that period ends after July 14, 2020.
Qualified Opportunity Zone Investments
The Notice also extends timelines for investments of capital gains in qualified opportunity funds. Generally, a taxpayer that has capital gains from the sale of a property has 180 days from the realization of the capital gain to invest in a qualified opportunity fund in order to be eligible for deferral and potential exclusion of the gain from the taxpayer’s income. However, the Notice treats this 180-day period as a “time-sensitive” action, similar to a 1031 exchange, so that if the taxpayer’s deadline to invest in an opportunity fund falls between April 1, 2020 and July 14, 2020, then the deadline is automatically extended to July 15, 2020. This extension provides taxpayers with additional time to make an eligible opportunity zone investment and defer potential capital gains.
Procedural Relief for Time-Sensitive Transactions”
April 27, 2020
By: William Mullen and Reese Dollins