The 1031 exchange deadline extension: Breathing room or double-edged sword? RLG attorney Dan Gauthier comments

By David Wieland | Forbes

In the pre-coronavirus world, April 15 was an important date, representing the deadline for U.S. residents and citizens to file federal income taxes. However, in the current environment, that drop-dead deadline has been pushed to July 15, 2020.

The upcoming mid-July deadline is also important for those making use of section 1031 of the U.S. Internal Revenue Code, which allows capital gains tax deferrals on investment property sales. The IRC section entitled “Exchange of real property held for productive use or investment” allows investors to “exchange” their original assets into “real property of like kind.”

Prior to the pandemic, investors involved with this exchange would have 45 days from when the original property was sold to find a like-kind replacement property. If that replacement property wasn’t found, investors would be required to pay taxes on the capital gains from the initial sale.

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“Setting aside the obvious benefit of more time for real estate investors to find a replacement property as part of a 1031 exchange, the 1031 exchange deadline extensions appear to have unintended supply and demand consequences, due in part to the extended 45-day identification window ending for all applicable investors on the same day: July 15, 2020.” ~ Dan Gauthier, Attorney at Rose Law Group

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