1031 Exchange Timeline Extensions - What Are They & How Do They Apply to Your Transaction Timeline

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If you’re familiar with 1031 exchanges, you know that they come with strict timelines. You have 45 days from the date of your property sale to identify replacement properties, and 180 days to complete the exchange. Failure to meet these deadlines can result in significant tax consequences. However, Revenue Procedure 2018-58 permits extensions of these deadlines to certain taxpayers affected by federally declared disasters!

What does this mean for you and your Exchange?

To answer that question, we sat down with David and Tom Moore, 1031 gurus with years of experience helping investors navigate the intricacies of these Exchanges.

First, let’s talk about what a federally declared disaster is. This is a natural catastrophe, such as a hurricane, tornado, flood, or wildfire, that the president declares a major disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. In other words, it’s a widespread event that causes significant damage and disruption.

If you’ve been affected by a federally declared disaster and are in the middle of a 1031 Exchange, you may be eligible for an extension of your identification and exchange periods. David and Tom explain that the extension can be up to 120 days for both periods, but you must meet certain criteria to qualify.

First, you must be located in a disaster area designated by the Federal Emergency Management Agency (FEMA).

Second, you must have either sold the relinquished property, acquired the replacement property, or identified the replacement property on or before the date of the disaster.

Third, you must be unable to complete the exchange within the original timelines due to the disaster. If you’re in the middle of a 1031 Exchange and have been affected by a federally declared disaster, it’s worth exploring whether you’re eligible for an extension of your identification and exchange periods.

Contact a qualified intermediary or tax advisor to discuss your specific situation and determine the best course of action. And as always, consult with a tax advisor or attorney to ensure that you understand the full implications of any decisions related to your exchange.

Read the Full Transcript

David Moore: Hi, David Moore and Tom Moore today, I’m very happy to have my brother here with us today, you guys don’t get to see him very often. You’re stuck looking at me all the time, but we’re going to have some conversations about a few different topics that are occurring right now, and one of them is an extension. It seems like we’ve got disasters everywhere, so with a disaster comes an extension, and you’re the one that deals with that side of the business. So, would you like to share your thoughts on some of these, Tom?

Tom Moore: Yeah, it’s been an interesting year with respect to extensions. We’ve got a lot of them issued in the last, say, 18 months or so, and the IRS has been pretty liberal with them. For example, a lot of times when we get an extension, it’ll apply to just a county or two that’s an affected area. We saw in Florida, and I believe in Georgia also, where they issued extensions to the entire state. Those have passed, but California, we got extensions when we had the recent storms down there, there was an extension issued initially, and then they gave at least two updates that I know of where they added more and more counties to those extensions.

And in fact, those are transactions or extensions that will be affecting transactions for California investors all the way up to sales that occur into September of this year. So, people who have sales or who are considered to be affected taxpayers may get longer extensions or longer ID periods than the normal 45 days all the way up until closings that happen in September. So yeah, those are the most recent ones we have, but it’s been an interesting year.

David Moore: So, if people have questions on that Tom, we can get them information and then they would go and talk to their tax people, or what’s sort of the course of action for somebody that feels that they might be affected by one of these?

Tom Moore: Yeah, so they can certainly call us up, we will give them links to the appropriate sites, the IRS web page. And also, the appropriate sections and the IRS codes that deal with extensions. We cannot tell people whether or not they make that decision, whether or not they are an affected taxpayer or what these extension dates will be, we can provide them with the information and then they will determine whether they, or they and their tax and legal people will determine whether or not they have those extensions available to them, and then basically they will provide us with their new 45 and 180 day deadlines for the exchanges.

David Moore: Great. So just to refresh everybody’s memory on this, you don’t have extensions available just electively ever in a 1031 exchange. So, you can’t just say, well, gee, this property sold, and I can’t get it so I get more time or whatever might happen. So, the only way you’re going to be granted an extension is if you’re an affected taxpayer in one of these situations.

Tom Moore: Yeah, well, you can be an affected taxpayer, or you can have… There are extensions available to people that are not considered to be an affected taxpayer, but it may be a transaction that happens in a certain area, or they’ve got properties picked out that they’re acquiring in a certain area that has been affected by the disaster.

David Moore: So, the two of us have been in this business for over 30 years at this point… 32 years at this point. And if we look at, for example, the Northwest, I can only remember two ever issued here, and they were both in the same year, weren’t they?

Tom Moore: Yeah, we don’t have them much here, we had the most recent were the fires.

David Moore: And that was right after COVID, which was basically a big fire.

Tom Moore: Yeah.

[laughter]

David Moore: But those were really the only two that I can remember in the Northwest.

Tom Moore: Yep.

David Moore: So, if you’re looking for extensions, go pick a hurricane zone or someplace like that I guess. But yeah, it’s really a tough deal, obviously, but there are definitely situations where people, like Tom is saying an affected taxpayer can be granted an extension.

Tom Moore: Yeah.

David Moore: And I think you made a critical comment, they’re going to talk to their tax people about it, and I think this is just one more example of why. I always say I feel like good tax counsels are probably the most important people in somebody’s life these days, just especially with another 85,000 new people being hired to chase people on these situations.

Tom Moore: Yeah. Exactly, exactly. They need their tax help, they need some good tax and legal device or advisors any time they are doing their transactions, we certainly think we differentiate ourselves in the fact that we give people a lot of information, but we cannot give advice, so to speak, so yeah, we’ll give you the information to make you dangerous and then you can go out and talk over with your tax and legal people and make the decisions that are right for you.

David Moore: Well, thank you for that explanation, Tom, and it’s great to have you here. We’re going to sign off for a second, we’ll be right back. David Moore and Thomas Moore of Equity Advantage 1031exchange.com. Thank you.

The Guys With All The Answers…

David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.