In the wake of the recent California wildfires and other natural disasters, it’s crucial to understand how the IRS provides disaster relief, especially regarding 1031 Exchanges. These Exchanges can be complex, and disasters add another layer of complexity. Here, Tome and David Moore of Equity Advantage delve into what you need to know about IRS disaster extensions and how they may impact your 1031 transactions.
Disaster Relief Extensions
Disasters like the wildfires in Southern California often lead to IRS disaster declarations, which may include extensions for 1031 Exchanges. However, not all disaster declarations automatically qualify for these extensions. They must contain specific language to apply to 1031 Exchanges.
For those affected, whether you reside in the disaster area or have identified or Exchanged properties there, you might be eligible for an extension. The IRS will issue formal guidance, and it’s important to stay updated. A list of recent tax relief provisions for taxpayers in disaster situations can be found at: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations.
Who Qualifies?
If you live in the affected area or if your transaction was impacted, you could qualify for extensions. This includes individuals who have identified properties or are planning to acquire property in these areas. Even if you don’t live there, you might have options if your transaction involves affected properties.
Types of Extensions
Extensions typically affect either the 45-day identification period or the 180-day Exchange period. However, both periods aren’t always extended equally. For example, an extension might add time to your identification period but not necessarily to the Exchange completion period.
These extensions are complex, and the IRS doesn’t make them easy to navigate. They provide specific deadlines, and it’s crucial to understand these to avoid missing them.
How We Assist
At Equity Advantage, we aim to provide as much information as possible. We guide you on where to find the necessary IRS letters and how to determine if you’re an affected taxpayer. While we can’t make the final determination, we can advise you to consult with your tax professionals.
Once you verify your status with your tax advisor, you’ll fill out a form stating your qualification for the extension, including your new deadlines. This form is crucial to ensure your transaction aligns with the extended dates.
Real-Life Scenarios
We’ve experienced numerous extensions over the years, such as those for hurricanes in Florida and fires in California and Oregon. These events often lead to multiple extensions for affected areas, sometimes overlapping as new disasters occur.
Stay Informed
In these challenging times, staying informed and prepared can make all the difference. Subscribe to our newsletter for updates, and consult with your tax advisors to ensure you’re taking full advantage of any available extensions. Whether you’re directly impacted by the fires or navigating the complexities of a 1031 Exchange, we’re here to help you every step of the way.
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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.
