Published in RISMedia

United States tax law allows the exchange of one investment or business-use real property for another of like-kind, without the immediate imposition of income tax. These “1031 like-kind exchange” rules permit the deferral of taxes, so long as the taxpayer satisfies numerous requirements and consummates both a sale and purchase of replacement property within a certain timeframe.

Specifically, in order for real property exchanges to qualify for nonrecognition of gain (tax deferral treatment), the owner has to identify a possible replacement property within 45 days of relinquishing the former property. The rules also require that the exchanger must close on the acquisition of the replacement property within 180 days of trading the first property.

However, the current COVID-19 pandemic has prevented many individuals and businesses who are in the middle of a like-kind exchange from being able to make these deadlines. For example, meeting the 45-day deadline for identifying a property to acquire can be impossible if access is not granted to investigate the property to determine its desirability. Likewise, those who are approaching the 180-day deadline for closing on a replacement property can find it impossible to do so because of the shutdown of title companies and other problems resulting from the widespread closure of business operations around the nation.

The National Association of REALTORS® (NAR) and other real estate trade groups urged the Internal Revenue Service (IRS) to provide deadline relief for real property owners involved in 1031 like-kind exchanges who have been negatively impacted by the COVID-19 pandemic. The IRS quickly acted to issue Notice 2020-23 granting deadline relief.

Notice 2020-23 provides that time-sensitive actions, such as the 45-day and the 180-day deadlines under Section 1031, which fall between April 1 and July 14, 2020, are automatically delayed until July 15, 2020. So, for example, if a property owner entered into a like-kind exchange by transferring the prior parcel on March 10, 2020, he or she would normally be required by the 45-day rule to identify a replacement property by April 24, 2020. In this case, the notice delays the 45-day deadline until July 15, 2020.

NAR has expressed gratitude for the deadline relief, but noted in a follow-up letter to the U.S. Treasury Department that those with 1031 like-kind exchange deadlines occurring from March 13 (the start of the COVID-19 disaster) through March 31, 2020, were not covered by the notice. The letter also requests deadline relief for those with deadlines falling between these dates.

Separately, Notice 2020-23 also includes relief for those planning to roll over capital gains from a prior investment into an Opportunity Fund. Such investors are also given until July 15, 2020 to make the rollover if the 180-day requirement under the Opportunity Zone rules falls between April 1 and July 14, 2020.

As our nation responds to the COVID-19 health crisis, NAR will continue to press lawmakers to ensure that the real estate industry is given the support it needs so that real estate transactions can occur safely and efficiently. For more information, please visit

Evan Liddiard is the director of federal taxation for the National Association of REALTORS®.