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2022 1031 Exchange Tax Extensions: Why Waiting Until the Deadline Could Potentially Be a Mistake

By Nick Snyder, Kay Properties and Investments

During the 2022 calendar year, the United States had many natural disasters that led to tax extensions for many taxpayers in seven states across the United States. Many counties in Alabama, Arkansas, California, Georgia, Indiana, Mississippi, and Tennessee issued extensions for local taxpayers. The extensions were applied to individuals, businesses, and pass-through entities whose tax returns and payments were due to the states. (For a breakdown of each county, please refer to the bottom of the article). Please note that this article should not be considered tax or legal advice. You should speak with your CPA and tax attorney prior to making any investment and/or 1031 exchange decisions.

The extensions were due to many natural disasters including tornados, thunderstorms, and large floods across these various states. The IRS has also indicated that if a taxpayer was in a certain disaster area where state tax deadlines were extended, the federal tax return deadline was also extended.

For real estate investors who are looking to complete a 1031 exchange, the extensions may be a blessing as there is now much more time to identify and close on each of the properties for their 1031 exchange. Typically, real estate investors have 45 days after the close of the relinquished property to identify the replacement properties and 180 days to then close on the identified properties.

For real estate investors in states such as Alabama, California, and Georgia, they now have until October 16, 2023 to both identify and close on each of the properties for their given 1031 exchange. Many investors may believe that they only must identify the replacement properties by the October 16th deadline however, this is not the case. Each of the investors must also close on the given properties by October 16, 2023.

For Example: If an investor were to have closed on the relinquished property on February 1, 2023, they would have until March 18, 2023 to identify the replacements and until July 31, 2023 to then close on the properties. Now given the extension, investors have until October 16th to both identify and close on the properties for the 1031 exchange.

With so many exchanges all facing the same deadline, there is a potential chance however that investors may run into some unaccounted-for issues.

While the extensions were announced for a good reason, many investors may now be sitting back and waiting until they’re closer to the deadline to look for properties for their 1031 exchange. More time to look for properties is oftentimes a good thing for investors (although they may be missing out on a large amount of monthly rental income potential by being uninvested for a longer period of time*) but with a now larger pool looking for a finite number of properties, the demand may be heightened for 1031-eligible real estate.

With such a potentially large demand and need for 1031-eligible real estate in the coming months, many investors are considering their options now before the extension deadline. One option that 1031 investors are looking at more than ever is the Delaware Statutory Trust (DST). Many investors are drawn to the DST because the properties are typically already pre-packaged and closed on by the DST sponsor companies. Because of the turn-key nature of the DST, it allows investors to potentially close in three to five business days while other real estate investments may take weeks or even months to close. With the DST 1031 exchange investments quick closing timeframe, investors are able to get their money working for them in an efficient manner and now generating potential monthly rental income*.

All in all, many investors facing a 1031 exchange think of the extensions as a blessing but with so many exchanges going on at once, all with one deadline, it may potentially be prudent to take a look at currently available properties before the extension deadline is upon us.

Nick Snyder is a senior associate with Kay Properties and Investments.

About Kay Properties and Investments

The platform provides access to the marketplace of typically 20-40 DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients and a DST secondary market. Kay Properties team members collectively have over 200 years of real estate experience and have participated in over $30 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital, member FINRA, SIPC.

Alabama – Tax Deadline: October 16, 2023

- Autauga

- Barbour

- Chambers

- Conecuh

- Coosa

- Dallas

- Elmore

- Greene

- Hale

- Mobile

- Morgan

- Sumter

- Tallapoosa

Arkansas – Tax Deadline: July 31, 2023

- Cross

- Lonoke

- Pulaski

California – Tax Deadline: October 16, 2023

- Alameda

- Alpine

- Amador

- Butte

- Calaveras

- Colusa

- Contra Costa

- Del Norte

- El Dorado

- Fresno

- Glenn

- Humboldt

- Imperial

- Inyo

- Kern

- Kings

- Lake

- Los Angeles

- Madera

- Marin

- Mariposa

- Mendocino

- Merced

- Mono

- Monterey

- Napa

- Nevada

- Orange

- Placer

- Plumas

- Riverside

- Sacramento

- San Benito

- San Bernardino

- San Diego

- San Francisco

- San Joaquin

- San Luis Obispo

- San Mateo

- Santa Barbara

- Santa Clara

- Santa Cruz

- Sierra

- Siskiyou

- Solano

- Sonoma

- Stanislaus

- Sutter

- Tehama

- Trinity

- Tulare

- Tuolumne

- Ventura

- Yolo

- Yuba

Georgia – Tax Deadline: October 16, 2023

- Butts

- Crisp

- Henry

- Jasper

- Meriwether

- Newton

- Pike

- Spalding

- Troup

Indiana – Tax Deadline: July 31, 2023

- Allen

- Benton

- Clinton

- Grant

- Howard

- Johnson

- Lake

- Monroe

- Morgan

- Owen

- Sullivan

- White

Mississippi – July 31, 2023

- Caroll

- Humphreys

- Monroe

- Montgomery

- Panola

- Shakey

Tennessee – Tax Deadline: July 31, 2023

- Cannon

- Hardeman

- Hardin

- Haywood

- Lewis

- Macon

- McNairy

- Rutherford

- Tipton

- Wayne


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