On April 9, 2020, the IRS issued Notice 2020-23 (the "Notice") which expands the filing and payment deadline relief announced by the Internal Revenue Service ("IRS") in March. The March announcement gave taxpayers until July 15, 2020 to file their federal income tax returns and to pay federal income taxes, each of which were originally due on April 15, 2020. The Notice extends additional key tax deadlines for individuals and businesses including certain deadlines applicable to taxpayers engaging in time-sensitive deferred like-kind exchanges.
Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code") provides that no gain or loss is recognized if certain qualifying property is exchanged solely for other qualifying property of "like kind." Section 1031 of the Code also permits certain "deferred" exchanges to qualify for nonrecognition treatment under circumstances where (1) the "replacement" property to be received in the exchange is identified on or before the date that is 45 days after the date on which the taxpayer transfers the "relinquished" property, and (2) the "replacement" property is received no later than the earlier of (a) 180 days after the date on which the taxpayer transfers the "relinquished" property or (b) the due date of the taxpayer's income tax return for the tax year in which the "relinquished" property was sold.
The Notice permits taxpayers who are otherwise obligated to take certain "time-sensitive" actions, including the Section 1031 45-day identification and the 180-day replacement, on or after April 1, 2020 and before July 15, 2020, to take such actions on or before July 15, 2020.
It should be noted that in 2018 the IRS issued Revenue Procedure 2018-58, which provides for a postponement of up to 120 days to perform the acts listed in that revenue procedure (which includes the Section 1031 deferred exchange 45-day identification and 180-day replacement) for taxpayers affected by a federally declared disaster. It is currently not clear how the provisions of the Notice interact with the 120-day postponement available under Revenue Procedure 2018-58.
The current situation is extremely fluid and issues and concerns among employers and their employees are arising on a daily basis. We are available to assist taxpayers with these issues and concerns.
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