The Internal Revenue Service has issued Notice 2020-23 which extends the deadlines for taxpayers to invest capital gains in a 1031 exchange and qualified opportunity zone fund due to the coronavirus (COVID-19) pandemic.
Section 1031 of the Internal Revenue Code allows investors to defer paying capital gains taxes on investment property sales by reinvesting the proceeds into a similar investment property within a specified timeframe. After an investment property is sold, investors typically have 45 days to identify the replacement property and 180 days to complete a transaction.
Taxpayers now have until July 15, 2020 to identify and/or purchase a replacement property for 1031 exchanges with deadlines due on or after April 1, 2020.
Regarding opportunity zones, the Tax Cuts and Jobs Act of 2017 established the program to stimulate economic development in distressed low-income communities by offering potentially significant tax benefits to investors that make long-term investments in these areas. Capital gains qualify for beneficial treatment under the law as long as they are invested within 180 days of the gain being realized.
Taxpayers now have until July 15, 2020 to elect to invest capital gains into a qualified opportunity fund if the original 180-day period expired on or after April 1, 2020.