Both 1031-exchanges and Opportunity Zone investments have deadlines that must be met – but the IRS extended those deadlines if they occur before July 15, 2020.
The Internal Revenue Service (IRS) has given real estate investors a break if an Opportunity Zone investment or 1031 like-kind exchange deadline already underway was impacted by the COVID-19 pandemic.
The IRS issued guidance Thursday evening following an advocacy campaign from the National Association of Realtors® (NAR).
The deadline time extensions are:
- 1031 like-kind exchanges:If an investor took the first step required for a like-kind exchange – selling the old property – and either the 45-day or the 180-day deadline to complete the next step falls between April 1 and July 15, 2020, the deadline is extended to July 15.
- Opportunity Zones:If an investor sold a capital asset, planned to roll over the gain into an Opportunity Fund, and the 180-day deadline to do so falls between April 1 and July 15, they can make the investment as late as July 15.
A 1031 like-kind exchange gets its name from the U.S. Internal Revenue Code. It allows real estate investors to sell one investment property and roll their profits into another investment property – the “like-kind” part – without paying capital gains taxes, providing the next investment property is worth at least as much as the original property.
Opportunity Zones are geographic areas that generally face some kind of economic challenge. To help these areas, laws were created to give investors within these areas preferential tax treatment.
Sole proprietor tax benefit
In addition to the investment deadline changes, the IRS also announced that sole proprietors who pay quarterly estimated taxes now have until July 15 to file their second quarter payment.
As a result of an earlier IRS notice, first quarter estimated tax payments had already been extended to July 15. This means that any individual or corporation with a quarterly estimated tax payment due on or after April 1, 2020, and before July 15 can wait until July 15 to make that payment without penalty.