COVID-19 and the Presidentially Declared Disaster Extension for Section 1031 Exchanges

Monday, March 23, 2020 by Len Berkowitz

by: Zachary Kramer & Len Berkowitz, Esq.

As the world seems to grind to a halt with the spread of Covid-19, we would like to take some time to discuss the potential extension of 1031 exchange period deadlines. Every 1031 exchange is beholden to the 45 day identification period and 180 day exchange period, with no possible way to apply for an extension (beyond extending the exchange period through extending the due date of that year’s tax return). However, in times of crisis, the IRS will grant taxpayers the right to extend their deadlines by 120 days, so long as their exchange is directly affected by the disaster, by providing a written notice on their website. This notice must specifically reference IRS Rev. Proc. 2007-56, section 17, and the taxpayer must qualify as an affected person in the context of the aforementioned section. The general rule states that a taxpayer in the midst of a 1031 exchange can obtain (at minimum) a 120-day extension on their exchange period if:

  1. The relinquished/replacement property is located in the covered disaster area (as defined in section 301.7508A–1(d)(2)) referenced in the IRS notice on their website or other news release.
  2. The principal place of business of any party to the transaction (a qualified intermediary, seller/buyers attorney, lender, or a title insurance company insuring the transaction) is affected by the presidentially declared disaster or located in the designated “covered disaster area”
  3. Any party to the exchange (or an employee of such a party that is directly involved with the exchange/transaction) is killed, injured, or missing as a result of the Presidentially declared disaster
  4. A document related to the exchange or a relevant land record is destroyed, damaged, or lost as a result of the Presidentially declared disaster (such as an exchange agreement/assignment, or a previously recorded deed required by the title company to complete the chain of title in order for them to insure the purchase/sale end of the exchange)
  5. A lender decides not to fund a real estate closing either permanently or temporarily due to the Presidentially declared disaster, or because flood, disaster, or other hazard insurance is not available due to the Presidentially declared disaster.
  6. A title insurance company is unable to provide an owners/lenders policy to insure the purchase/sale of an exchange property due to them being affected by the presidentially declared disaster.

For further reference, please see

Beyond the aforementioned general rule, the IRS also provides Additional Relief for Substantially Damaged Identified Property involved in a 1031 exchange. If the 45-day identification period expires before or on the day the presidentially declared disaster occurs, and an identified property has been damaged, destroyed or otherwise affected by being located in this Presidentially declared disaster area, the 120 day deadline will also apply to the identification period, allowing even more time to find backup replacement properties.

Riverside 1031 is closely monitoring these developments and the IRS response to the situation as it unfolds. Throughout the country people are hoping for a quick resolution to the spread of this infectious disease so they can resume their normal daily activities. However, until such resumption takes place, people will continue to face many challenges in both their personal and professional lives. The IRS has already acknowledged this upheaval by deferring both the filing and payment of income taxes for most taxpayers until July 15th.

Given the current conditions, it would seem appropriate for the IRS to extend the 1031 deadlines as well. Taxpayers that are in the midst of exchanges are also very much affected by the impact of Covid-19 and may be unable to perform the normal functions that they need to in order identify and acquire their replacement properties prior to the expiration of the exchange periods.

While such extension of exchange deadlines seems appropriate, disaster extensions have never been considered on such a large scale. Nevertheless, these are unprecedented times that call for unprecedented measures. Extending these deadlines to enable exchangers to complete their exchanges is the correct thing to do. Whether in-fact the IRS comes to the same conclusion is still to be seen. We will continue to update you with any recent developments regarding section 1031 as they are released by the federal government.  You may also follow IRS releases in real time by visiting

About the Authors

If you have any questions on this article, the IRS response, general 1031
issues or a specific transaction, please do not hesitate to contact us. We are
open for business and here to service you during these difficult times.

Len Berkowitz, Esq. can be reached at, or at

Zach Kramer can be reached at, or at