It’s no secret that 2020 has been a roller coaster of a year for everyone, and real estate investors are no exception. Our team at Diversified Investment Strategies is here to help guide you through these uncertain times, and to offer you information and assistance that you may be seeking.
Here are some updates on 1031 exchanges for real estate investors during the COVID-19 pandemic:
1. Are 1031 exchanges still allowed? Absolutely! While there is talk about increasing taxes on real estate investors and targeting 1031 tax-deferred exchanges in the upcoming election, as for now, nothing has changed with 1031 exchanges and we are still helping investors complete exchanges.
2. Are 1031 exchanges still a good idea? Yes, depending on your circumstances. With uncertain times and an up-and-down economy, it’s important to many investors to defer paying federal taxes and to save as much as possible. We are here to help you with your exchange needs.
3. Has another extension been announced? As of now, no further extension has been announced by the IRS for 1031 exchange timelines. Only 1031 exchange deadlines that fell between April 1 and July 14, 2020 could be extended to July 15. If any new extensions are announced, we will let you know.
4. Should I identify more than one property? It’s always a smart idea to have back up properties in mind with a 1031 exchange, in case your first plan falls through. This is especially true now, with such an uncertain market and strict timelines.
5. What if I can’t get in to see a building? If you’re looking for an exchange property, some properties are only offering virtual tours right now, but often appraisers and inspectors can still get in. Be flexible with the process. Our team at DIS will help you in every way that we can.
6. What if I don’t find property in the exchange time frame? As always with 1031 exchange timelines, if you do not identify and/or exchange properties in the given allotted time, you will pay taxes on the relinquished property. There may be ways to reduce your tax payment, however, such as through the use of carry forward losses or delay the payment taxes.
7. Is now a good time to diversify? Yes! With a lot of unknowns for the future of residential and commercial real estate markets, now would be a very wise time to diversify your assets among different investment options, such as DSTs, UPREITs and so on. We can help you with this!
If you have any questions at all about 1031 exchanges or the real estate market as a whole right now, please don’t hesitate to contact our team at DIS. We are here to answer your questions, help you determine what the best steps are for you going forward, and to guide you through any process you need assistance with. We look forward to hearing from you soon!