Due to the COVID-19 pandemic, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. Among the provisions of the Act, was the deadline extension for filing 2019 tax returns from April 15, 2020 to July 15, 2020.However, the CARES Act made no mention of extensions for taxpayers with a Section 1031 exchange already in progress. Nevertheless, Rev. Proc.
This is one of the most common questions asked of a qualified intermediary.The answer: Qualifying property under §1031 must be held by the taxpayer for “productive use in a trade or business, or for investment.” The determination of whether property is held for productive use in a trade or business or for investment is made as of the time of the exchange.
For quite some time, the interaction of §121 (exclusion of gain on the sale of a principle residence) and §1031 (non-recognition of gain or loss in like-kind exchanges) has confused many taxpayers. Fortunately, the Internal Revenue Service has provided clear guidance on this matter with Revenue Procedure 2005-14.