Is COVID-19 Putting Your 1031 Exchange at Risk?


Don’t let uncertainty in the market mean uncertainty for your Exchange.

Given the impacts of Covid-19 and the required shelter-in-place orders, investment property owners pursuing a 1031 Exchange Fee-Simple replacement property may have a difficult time closing on their replacement property within the IRS’s strict 180-Day Exchange window. There are also many risks associated with closing an Exchange during these unprecedented times:
  • Difficulty scheduling inspectors for property condition reports
  • Tenants not wanting unknown individuals touring their units during self-quarantine
  • Property P&L statements becoming worse as rent collections are more uncertain
  • Difficulty securing loans at reasonable interest rates
  • Onerous lender requirements such as 12+ months’ reserves

Commercial real estate industry associations like ADISA and IPA have formally asked the Treasury and IRS to “delay 1031 Exchange deadlines” on March 23rd. An extension was granted for Exchanges via IRS Notice 2020-23. The extension allows for all Exchanges with 45-day identification and 180-day close deadlines occurring between April 1st and July 14th to be extended to the later of the traditional deadline or July 15, 2020. The extension provides some relief, however as of today there is no relief for exchanges beginning after June 1, 2020.

If you or your clients plan to perform a 1031 Exchange during Covid-19, please keep the following deadlines in place. While there has been a formal request submitted to the IRS for additional relief, this relief is uncertain as of today

Reducing Risk with “1031 Exchange Insurance”
If you have concerns your 1031 Exchange is at risk, we recommend including Delaware Statutory Trust (DST) property on your Exchange Identification. We consider DSTs used in this context to be “Exchange insurance” since the risk of closing on DST property is less than that of Fee-Simple property. DSTs as a backup option may help protect your Exchange so that a major tax liability does not come due.

To learn more about DSTs, download our FREE Guide, “Investing in Delaware Statutory Trusts“. If you have questions regarding Delaware Statutory Trusts, contact us to schedule a complimentary 1031 Consultation. Our consultations can be done over the phone, via web conference, or in person at our offices located in Seattle, WA and in Portland, OR. To schedule your free consultation, simply call 206-686-2211 or CLICK HERE.

Austin Bowlin, CPA  – Partner at Real Estate Transition Solutions, provides exit strategy analysis, execution, income and equity replacement options for investment property owners. To reach Austin, call 206-686-2201 or email

The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the sponsors Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only.  If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee profits or guarantee protection against losses. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor.  This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Aurora Securities, Inc. (ASI), Member: FINRA/SIPC. Advisory services offered through Secure Asset Management, LLC (SAM), a Registered Investment Advisor. ASI and SAM are affiliated companies. Real Estate Transition Solutions (RETS) is independent of ASI and SAM.  

Get Answers. Get Advice.
Free 1031 Consultation