There Has Been a Discussion with the IRS on How the Typical Disaster Postponements Apply to Section 1031 (in Contrast to the Covid Postponement)
The Outline Below is a Change in Our Understanding and This Change Also Applies to the Other Ongoing Disaster Relief (See the IRS Disaster Relief Page For a List of Current Disasters)
45 Day and 180 Day Postponements for Disaster Areas in California and Louisiana
The IRS has issued postponements of the 45 day and 180-day deadlines as follows:
California: Fresno, Los Angeles, Madera, Mendocino, Napa, San Bernardino, San Diego, Shasta, Sonoma, and Siskiyou counties for wildfires that began on September 4, 2020.
Louisiana: Acadia, Calcasieu, Cameron, Jefferson Davis and Vermilion parishes for hurricane that began on October 6, 2020.
The Disaster Date is in bold above. (Note that some disasters occur on a single date; others, such as flooding, occur over a period of days and the Disaster Date above is preceded by beginning or began.)
The Covered Disaster Area is the counties or parishes listed above. [Please check the IRS disaster website periodically at the address listed below for updates because the FEA does not send out notices for each disaster or for counties added to ongoing disaster extensions.]
An “Affected Taxpayer” includes individuals who live, and businesses whose principal place of business is located in the Covered Disaster Area. Affected Taxpayers are entitled to relief regardless of where the relinquished property or replacement property is located. Affected Taxpayers may choose either the General Postponement relief under Section 6 OR the Alternative relief under Section 17 of Rev. Proc. 2018-58. Taxpayers who do not meet the definition of Affected Taxpayers do not qualify for Section 6 General Postponement relief.
NOTE THE OPTIONS!
Option One: General Postponement under Section 6 of Rev. Proc. 2018-58 (Affected Taxpayers only). Any 45-day deadline or 180-day deadline (for either a forward or reverse exchange) that falls on or after the Disaster Date in bold above is postponed to January 15, 2021 (California) or February 16, 2021 (Louisiana). The General Postponement applies regardless of the date the Relinquished Property was transferred (or the parked property acquired by the EAT) and is available to Affected Taxpayers regardless of whether their exchange began before or after the Disaster Date.
Option Two: Section 17 Alternative (Available to (1) Affected Taxpayers and (2) other taxpayers who have difficulty meeting the exchange deadlines because of the disaster. See Rev. Proc. 2018-58, Section 17 for conditions constituting “difficulty”). Option Two is only available if the relinquished property was transferred (or the parked property was acquired by the EAT) on or before the Disaster Date. Any 45-day or 180-day deadline that falls on or after the Disaster Date is extended to THE LONGER OF: (1) 120 days from such deadline; OR (2) the postponement date listed in the Notice [which is January 15, 2021 for California and February 16, 2021 for Louisiana]. Note the date may not be extended beyond one year or the due date (including extensions) of the tax return for the year of the disposition of the relinquished property (typically, if an extension was filed, 9/15 for corporations and partnerships and 10/15 for other taxpayers).
Please see Revenue Procedure 2018-58, Section 17, and the Notices shown on https://www.irs.gov/newsroom/tax-relief-in-disaster-situations
Ask The Experts: Crowdfunding For Real Estate
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