The IRS is giving investors with like-kind exchange or opportunity zone investment deadlines between April 1 and July 15 more time to complete their deals.
The deadline is extended to July 15 for all taxpayers, including trusts, estates, corporations and other non-corporate tax filers.
Like-kind exchanges under Section 1031 allow real estate investors to sell a single asset, such as condominiums or an office building, identify another property with a similar value to buy with the proceeds from the first within 45 days, and close on it within 180 days. Such a like-kind exchange allows an investor to avoid paying capital gains on the sale of the first property.
The new guidance extends both the 45-day and the 180-day deadlines to July 15 if the dates fall between April 1 and July 15. However, it is likely that if an investor has until July 15 to identify the second property the 180-day deadline for closing on it would stay the same.
Several commercial real estate groups had petitioned U.S. Treasury Secretary Steven Mnuchin to extend the deadlines for purchasing replacement properties by extending both deadlines by 120 days.
Many legal experts expected the extension to be longer, given past experience. The situation is in flux and it is possible that additional guidance will be issued, depending upon what happens with the COVID-19 pandemic.
The National Association of Realtors applauded the move by the IRS.
“During recent weeks, NAR strongly advocated for tax payment deadline extensions — including for 1031-like-kind exchanges and Opportunity Zone investments — as this pandemic left small businesses and independent contractors particularly vulnerable,” said National Association of Realtors President Vince Malta, a broker at Malta & Co., Inc., in a statement.