The IRS's extensions for filing 2019 individual and business tax returns have had a significant impact on taxpayers and tax preparers alike. What should not be overlooked is that these extensions are part of a comprehensive effort by the IRS to alleviate the economic hardships caused by these uncertain economic times. IRS Notice 2020-23 expands prior relief efforts to provide extensions to taxpayers for “Specified Time-Sensitive Actions” due to be performed on or after April 1, 2020 and before July 15, 2020, including Opportunity Zone and 1031 Exchange transactions. Specified Time-Sensitive Actions include a long list of tax related deadlines published in the Treasury Regulations and IRS administrative guidance. Notice 2020-23 also clarifies prior IRS guidance extending tax return filing and payment deadlines.

Opportunity Zone Extensions

Notice 2020-23 extends one Opportunity Zone deadline. The 180-day deadline for taxpayers to invest eligible capital gain into an Opportunity Zone or Opportunity Zone Fund. The deadline is extended until July 15, 2020 for taxpayers whose original investment deadline fell on or after April 1, 2020 and before July 15, 2020. This extension benefits taxpayers realizing capital gains between October 4, 2019 and January 17, 2020.

The Opportunity Zone program enables taxpayers to defer, and potentially permanently reduce, federal income taxes on capital gains by reinvesting capital gains into specified geographic areas designated as Opportunity Zones. The program is subject to numerous deadlines and technical rules. The 180-day investment deadline extended by Notice 2020-23 is the first deadline that taxpayers participating in the Opportunity Zone program must comply with. Relief from this deadline provides an opportunity for additional taxpayers to consider the significant tax benefits available under the Opportunity Zone program.

1031 Exchange Extensions

Taxpayers in the middle of a 1031 Exchange are facing unique practical issues in the face of government mandated social distancing restrictions. Purchasing real estate and conducting due diligence is nearly impossible when many sellers and realtors have stopped permitting prospective buyers from physically visiting properties. Notice 2020-23 extends the 45-day identification deadline and 180-day exchange deadline for 1031 Exchanges. Eligible taxpayers include those whose 45-day deadline or 180-day deadline falls on or after April 1, 2020 and before July 15, 2020. Affected deadlines are extended to July 15, 2020.

Notice 2020-23 creates a unique issue for 1031 Exchanges. If a taxpayer sold real estate in late February, the 45-day identification deadline is extended until July 15, 2020. The taxpayer’s 180-day deadline is not extended though as the original 180-day deadline is in August, after the July 15, 2020 extension date. Taxpayers enjoying an extended 45-day deadline to identify replacement property must still work to complete their 1031 Exchange by their original 180-day deadline pending additional relief from IRS.

The federal and state governments are responding rapidly to the ongoing public health and economic crisis. Taxpayer relief and administrative guidance continues to be updated frequently. The tax attorneys at McLaughlinQuinn LLC strive to remain at the forefront of this rapidly changing legal landscape. For more information on this newsletter, contact Cory J. Bilodeau, Esq., LL.M. , Tax Planning Partner, at (401) 655-2203 or via email at This email address is being protected from spambots. You need JavaScript enabled to view it. , or Matthew R. Joyce, Esq., LL.M . , Tax Counsel, at (401) 655-2208 or via email at This email address is being protected from spambots. You need JavaScript enabled to view it. .