COVID-19 Extensions for Section 1031 Exchanges and Opportunity Zones

Due to COVID-19, certain deadlines have been extended for Section 1031 exchanges and Opportunity Zone Funds.

Section 1031 Exchanges

IRS Notice 2020-23 (the Notice) has extended two deadlines for Section 1031 exchanges. These deadlines are for the 45-day identification period in which the taxpayer must identify the replacement property and the 180-day exchange period in which the taxpayer must acquire the replacement property (or sell its relinquished property in the case of a reverse like-kind exchange).

If the deadline for either of these periods would ordinarily end after March 31, 2020, the deadline may be extended until July 15, 2020. This relief is automatic; a taxpayer does not need to file any special form to receive this extension. 

Opportunity Zone Funds

The Notice has similarly extended the 180-day investment period for making a qualifying investment in an Opportunity Zone Fund. If that 180-day period would ordinarily end after March 31, 2020, the period may be extended until July 15, 2020.

In addition, there is generally a 31-month safe harbor for working capital held by a qualified opportunity zone business. Regulations allow this period to be extended by 24 months if the business is located in an opportunity zone within a federally declared disaster area. The entire United States has been declared a federally declared disaster area, so the working capital safe harbor may be extended from 31 to 55 months for Opportunity Zone projects nationwide.