An IRS publication, IRS Revenue Procedure 2007-56 Section 17, sets forth the rules surrounding such disasters as they apply to forward and reverse exchanges. This revenue procedure states that the last day of the 45-day identification period, the last day of the 180-day exchange period for forward exchanges and the beginning and end dates for a reverse exchange can be extended. More specifically, those dates are postponed to the later of (i) 120 days or (ii) the last day of the general disaster period authorized in the IRS News Release. The revenue procedure further provides that in no event may a postponement period extend beyond (i) the due date for filing the tax return for the year of the transfer or (ii) one year. As a practical matter, should the due date for filing the tax return cut the postponement period short, the filing of an extension would lengthen the date to the full time period.

Those taxpayers currently engaged in a 1031 exchange and struggling to complete their transaction due to the Coronavirus (COVID-19) crisis received long-awaited relief from the 45-Day Identification and 180-Day Exchange Period deadlines in Notice 2020-23. Released on April 9, 2020, this is an update to Notice 2020-18, “Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic.”

The notice provides that any person performing a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) – (vi) of the Procedure and Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action), is an Affected Taxpayer. For purposes of this notice, the term Specified Time-Sensitive Action also includes an investment at the election of a taxpayer due to be made during the 180-day period described in section 1400Z-2(a)(1)(A) of the Code. This includes the 45-Day Identification and 180-Day Exchange Period deadlines in a 1031 exchange.

Anyone with a 45-Day Exchange Period or 180-Day Exchange Period deadline between April 1 and July 15, 2020 will have an automatic extension to July 15th. Unfortunately, taxpayers with deadlines in February and March did not get the relief we were seeking. The Federation of Exchange Accommodators (FEA), the national 1031 trade association, will be requesting additional relief for the taxpayers that need it. 

For those who had a 45-Day Identification Period deadline on or after April 1st, you will have an automatic extension of time to make or change an identification

This last week the IRS provided Part III - Administrative, Procedural, and Miscellaneous Update to Notice 2020-18, Additional Relief for Taxpayers Affected by Ongoing Coronavirus disease 2019 Pandemic. In it there is a section addressing "Specified Time-Sensitive Actions". One could interpret this as potentially answering the demands of the marketplace, commercial real estate investors and associations, to provide clarification of how the Covid 19 issues will be addressed for investors involved or about to be involved in a 1031 tax differed exchange. What it means and how it will affect the 1031 standard timelines of 45 Day Idneitifiaction period and 180 Day closing requirement is yet to be determined. Here is the IRS section as published:

Section III GRANT OF RELIEF C. Relief With Respect to Specified Time-Sensitive Actions reads: "Affected Taxpayers also have until July 15, 2020, to perform all Specified Time-Sensitive Actions, that are due to be performed on or after April 1, 2020, and before July 15, 2020. This relief includes the time for filing all petitions with the Tax Court, or for review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax. This notice does not provide relief for the time period for filing a petition with the Tax Court, or for filing a claim or bringing a suit for credit or refund if that period expired before April 1, 2020."