Advertiser Disclosure

advertising disclaimer
Skip to main content
IRS

IRS Extends Like-Kind and Opportunity Zone Deadlines


[Updated: Aug 11, 2020 ] Apr 14, 2020 by Marc Rapport
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

The Internal Revenue Service (IRS) threw out another lifeline to real estate investors and the economic development community last week by extending tax deadlines this year for two key programs, one longstanding and the other quite new.

Because of the difficulty in closing real estate transactions, the IRS issued guidance on Thursday, April 9, that extended deadlines for 1031 like-kind exchanges and opportunity zone investments for transactions underway but not yet completed.

Both deadlines were extended under the Treasury Department's authority triggered by the president's declaration of a national emergency on March 13, 2020.

1031 like-kind exchanges

Like-kind exchanges have been part of U.S. tax law since the 1920s and allow the exchange of one investment of business-use property for another of like kind without an immediate tax liability. Sale of the original property to close on the second has to take place within 180 days to earn the deferral.

Title companies, law offices, and other key players in the closing process are closed or greatly limited right now as a result of the coronavirus, making it difficult to impossible to meet that timeline, the National Association of Realtors (NAR) said in a letter to the Treasury Department advocating for the extension. The same goes for the 45-day period for identifying possible properties as exchange candidates.

"Without relief, missing these deadlines could invalidate the deferral treatment promised by section 1031 due to no fault of the taxpayer," the NAR argued.

The IRS agreed, extending the 45-day deadline for identifying which property to exchange and the 180-day deadline for closing on the new property if the deadline for either falls between April 1 and July 15 and the older property has already been sold.

Opportunity zones

Opportunity zones are a much newer program. Created by the Tax Cuts and Jobs Act of 2017, they provide preferential tax treatment for investments, ideally of the job-creating kind, made in economically distressed communities through qualified opportunity funds.

The IRS relief announced last week allows investors seeking to place the gain from the sale of a capital asset into an opportunity fund to make that investment as late as July 15 if their 180-day deadline falls between April 1 and that date.

The IRS had just issued final guidance for the opportunity zone program in December. The agency has an easy-to-read explanation of the program -- including the tax break itself and where the zones exist -- here. And here is the full text of Notice 2020-23 that lays out details of the deadline extension.

Meanwhile, a Millionacres article from September provides a clear explanation of opportunity funds, many of which were still being created at that point. The Novogradac consultancy is the host of the Opportunity Zones Working Group and maintains a list of operating opportunity funds online here.

The new April 15

The extensions for like-kind exchanges and opportunity zones are among a series of tax deadline extensions the federal collector has announced since the pandemic took hold, including for 2019 returns and 2020 quarterly estimates.

Time will tell how popular that new deadline proves to tax collectors and taxpayers alike. Could it become the new April 15? Or will it be just another blip on the radar of dramatic changes to daily life and business resulting from the pandemic? Time will tell.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.

But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

The Motley Fool has a disclosure policy.