1031 Exchanges in the World of COVID-19

The Coronavirus has impacted virtually every aspect of the economy and real estate investors have been closely watching the pandemic’s effect on real estate investments that qualify for tax deferral IRC §1031 (also known as “1031 exchanges”). Not surprisingly, we have received numerous inquiries in this regard. Peak 1031 Exchange, Inc. would like to assure our clients that we are closely monitoring the situation for any information from the IRS and would like to provide the following updates:

Has COVID-19 Been Classified as a Natural Disaster?

Rev. Proc. 2018-58 permits extension of IRC §1031 exchange deadlines upon issuance of an IRS Notice or other guidance permitting relief to taxpayers due to Federally declared disasters that may allow for an extension of the 45-day identification and/or 180-day exchange deadlines.

As of this writing, the IRS has not yet announced an extension of the 1031 exchange deadlines due to the Coronavirus epidemic. However, many of the top real estate organizations in the country have submitted a letter to the IRS and Treasury Department requesting extensions for 1031 exchanges. We are therefore hopeful that we will receive some positive news on this front in the very near future. Rest assured that Peak 1031 Exchange will provide updated information as soon as it becomes available. Visit the IRS website for the latest updates on tax relief in disaster situations.

Is Peak 1031 Exchange able to oversee transactions under current Stay-at-Home orders?

Yes, absolutely. While our physical office is closed due to the Stay-at-Home Order issued by the State of California, all of our staff is equipped to work remotely and has been doing so without issue. Our business hours remain the same; all phone calls and emails are being answered as usual; and all transactions are being handled in a timely and efficient fashion.

Are my funds safe in a 1031 Exchange?

A major role of a Qualified Intermediary is to safeguard taxpayer funds during a 1031 exchange. As one of the nation’s most respected Qualified Intermediaries, you can rest assured that your funds are adequately safeguarded and secure at Peak 1031. Here are some of the steps we take to ensure the safety of our clients’ exchange funds:

  • At Peak 1031 Exchange, we only use banks that have top notch ratings. Funds are placed in a segregated exchange account, which is held “for the benefit of (FBO)” the exchanger.
  • All exchange fund disbursements require written authorization from the exchanger. In addition, such disbursements require dual authorization internally and are controlled by our separate Banking Division; sales and administrative staff have no authority or ability to transfer funds.
  • Our banks will place the funds into a Qualified Escrow Account (“QEA”) should you desire that method of security. The QEA provides for a bank escrow holder to oversee and authorize the movement of all funds, and for the bank to have the exchanger’s written authorization before moving any funds. We can also add an additional signatory of the exchanger’s choice to ensure the exchange funds cannot be moved without that signatory’s direct and written authorization.
  • Peak 1031 Exchange never commingles exchange funds with operating funds, and exchange funds are never reinvested in bonds or securities of any kind and are therefore always fully liquid.
  • Peak 1031 Exchange maintains all applicable insurance coverages including Errors & Omissions, General Liability, and Crime and Fidelity. Additional security options are available upon request.
  • Peak 1031 Exchange is recognized as one of the best exchange companies in the industry.

Peak 1031 Exchange is part of the Peak Corporate Network group of companies which offers a comprehensive suite of real estate services to homeowners, real estate professionals, and investors nationwide since 1991. The Peak 1031 Exchange division has operated in partnership with the Network since 2003, with experience guiding clients through numerous real estate cycles. We have the bandwidth and expertise to provide trustworthy management of your exchange transaction during volatile times like these.

For further inquiries or to set up a 1031 Exchange, feel free to contact Steven Rosansky, Esq. by phone at 949-836-7604 or the Peak 1031 Exchange office at 866-357-1031.

The Peak Corporate Network is a brand that represents a group of related separate legal entities, each providing its unique set of real estate services.