Notice 2020-23, issued April 9, 2020, is part of a series of guidance that broadly extends the deadlines for most payments, filing obligations and performance of time-sensitive actions. While Notice 2020-23 clearly extends certain deadlines for like-kind exchange transactions, the extent to which taxpayers can delay identification and replacement deadlines under section 1031 is not yet clear.
The uncertainty stems from the fact that Notice 2020-23 references Rev. Proc. 2018-58, which generally offers procedures for extended like-kind exchange deadlines. Notice 2020-23 determines eligibility for an extended deadline by reference to Rev. Proc. 2018-58. However, the Notice does not explicitly state that taxpayers can rely on the full relief offered under Rev. Proc. 2018-58.
Instead, Notice 2020-23 states in section II that the relief provided in this series of notices is “limited to the relief explicitly provided in these notices.” According to the Notice, affected taxpayers have until have until July 15, 2020, to perform all Specified Time-Sensitive Actions (including identification and replacement in a like-kind exchange). The extension to July 15 appears to be the extent of relief explicitly provided in the Notice.
Under section 17 of Rev. Proc. 2018-58, the last day of the 45-day and 180-day identification periods for like-kind exchanges under section 1031 that fall on or after the date of a federally declared disaster are postponed to the later of (a) the end of the general disaster extension period or (b) 120 days. Unfortunately, it is not clear whether section 17 of Rev. Proc. 2018-58 is applicable, given the apparent limited grant of relief in Notice 2020-23.
Several industry groups have submitted comment letters and asked the IRS for clarification, noting that taxpayers could be left with a condensed timeline to make replacements under section 1031. In the meantime, until the IRS issues further guidance, taxpayers are advised to proceed as though the relevant deadlines in their like-kind exchange transactions are delayed no further than July 15, 2020.
RSM will provide updated news and analysis if and when the IRS clarifies the procedures. To stay up to date on the latest information from RSM regarding the coronavirus public health emergency, visit our Coronavirus Resource Center.