April 10, 2020 – Guidance Received
The IRS has issued guidance related to Section 1031 and the COVID-19 pandemic.
The guidance was not nearly as specific as we would have liked, but there are people all over the country trying to extract further detail from their initial notice 2020-23 Click here for the notice.
First, the notice references their Revenue Procedure 2018-58 Click here for the REV PROC which more clearly defines disaster relief for Section 1031.
This is heavy reading, and many of the statements are confusing even to us, and we’ve been through this several times before with other disasters.
This is our first take on what we understand so far, we will update you as soon as we receive any clarification:
The IRS is setting the dates of the disaster from between April 1, 2020 and July 15, 2020. This is the first area of confusion since the President declared the national emergency on March 13, 2020. So, there are questions about exchanges that had salient dates back to this date.
The typical extension as defined in the REV PROC grants a 120 day extension on both the ID date and the 180th day. Further, they state that Exchangors are eligible for the extension if their Relinquished Property was sold prior to the date of the disaster.
We are not sure if further guidance will be issued, but there is still a lot confusion surrounding how the IRS is going to handle exchanges.
For now, here is what we know.
Since an exchange ends on the 180th day, or the date that taxes are reported, we are assuming that the July 15th date aligns with this date. An Exchangor has the ability to go beyond this date with an extension to their tax return.
Our understanding without further clarification is as follows:
Pursuant to Notice 2020-23, if the end of a taxpayer’s 45-day Identification Period or 180-day Exchange Period in a deferred exchange or the parallel periods in reverse exchanges under Revenue Procedure 2000-37 falls between April 1 and July 15, the applicable period is automatically extended to July 15, 2020, unless a taxpayer chooses to opt-out of the extensions. EWI clients who choose to opt-out of these extensions, need to notify us either by phone or email.
Given the significant changes that we’ve all had to make in response to COVID-19, we’d like to take this opportunity to assure you that our employees and their families are safe, and we hope the same for you and your families. The health and safety of our clients, our employees and their families are our top priorities.
As a company, we are able to work securely and remotely to ensure seamless service. No originals are required to complete your exchange for our purposes. We are ready and available to answer any questions you may have regarding your transactions, day or night.
As questions arise in our industry about the security of exchange funds held by qualified intermediaries, we want to assure you that exchange funds held by Edmund & Wheeler, Inc. are strictly held in segregated deposit accounts with FDIC insurance up to $250,000.00. Because The Provident Bank is our banking partner and headquartered in Massachusetts, our client’s escrow accounts are insured 100% above the FDIC limit by the Massachusetts Depositors Insurance Fund.
Please call my direct line any time if you have questions surrounding your exchange or to just check in with us with any questions you may have.
John D. Hamrick
Direct Line: 603-336-3190