1031 News

On June 11, 2020 the U. S. Treasury released proposed regulations that have been promised since the passage of the Tax Cuts and Jobs Act (TCJA) at the end of 2017. In the TCJA, Congress repealed 1031 like-kindlike-kind exchanges of personal property and left taxpayers with only real property 1031 exchanges. There are four primary provisions that clarify or change the current application of Section 1031.

What happens if you intended to effect a 1031 exchange, but the relinquished property sale closes and you receive the proceeds?  In a 1031 exchange1031 exchange , you may not receive relinquished property sale proceeds if the transaction is to qualify as an exchange and any capital gains are therefore taxable. With cooperation of the buyer and other parties to the transaction, you may be able to rescind the initial transaction and go forward with a 1031 exchange.

Does compliance with the IRS position in these instances matter, when the exchange is not going to be carried out and the taxpayertaxpayer is willing to pay the taxes? It may not matter from the taxpayer’s standpoint, but the QI is responsible for adhering to a course of conduct outlined by the Regulations and other rulings. Acting otherwise jeopardizes the QI’s position with the IRS and could jeopardize the exchanges of numerous other taxpayers. 

IRS Notice 2020-23 Provides Relief for Taxpayers Affected by the COVID-19 Pandemic. Learn more about how this deadline extension for 1031 exchanges may affect you.