The IRS has extended the 45- and 180-day deadlines for IRC 1031 exchange transactions due to the severe winter storms, flooding, and mudslides that started in California on January 8, 2023.
The extension’s essential points and commonly asked questions are listed below.
- The following counties are included in the list of those who are eligible for the extensions: Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin.
- The 45-day identification period may be extended by qualifying individuals who started an IRC 1031 exchange between November 24, 2022, and January 8, 2023, up to May 15, 2023, or 120 days after the initial 45-day deadline, whichever comes first.
- The 180-day exchange period may be extended by qualifying individuals who started an IRC 1031 exchange between July 12, 2022, and January 8, 2023, to May 15, 2023, or 120 days after the initial 180-day deadline, whichever comes later.
- To take advantage of this benefit, taxpayers might need to extend the deadline for completing their 2022 tax return.
What Kind Of 1031 Exchanges Are Covered?
- Forward Exchanges: It was transferred by no later than January 8, 2023, of the Relinquished Property.
- Reverse Exchanges: By no later than January 8, 2023, the Exchange Accommodation Titleholder acquired the Replacement Property or the Relinquished Property, as applicable.
Who Is An Eligible Taxpayer?
To qualify, the taxpayer must pass one of the following conditions:
They are an affected taxpayer: Any person whose primary residence is situated in the disaster area is considered an “Affected Taxpayer.”
- Any corporation, partnership, or sole proprietorship with its principal office in the disaster area
- Any person or corporate organization whose records are held in the disaster area, whether they are relief workers assisting in the area or are simply residents.
They are having “difficulty” meeting the deadlines: One of the following factors contributes to “difficulty” reaching 45- and 180-day deadlines:
- The property that was given up or replaced is situated in the disaster zone.
- Any party to the transaction, such as a qualified intermediary, exchange accommodation titleholder, transferee, settlement lawyer, lender, financial institution, or title insurance company, has their main office in the disaster area or for one of the additional factors detailed in Revenue Procedure 2018-58.
The New 1031 Exchange Deadlines
The 45-day identification deadline and the 180-day exchange date may be extended for an Affected Person or a Person Having Difficulty Meeting Deadlines in the following ways:
- Any deadline that falls on January 8, 2023, or later, may be postponed until the LATER of May 15, 2023, or 120 days after the day the deadline would have occurred.
- However, under no circumstances may this deadline be extended beyond (a) the taxpayer’s 2022 or 2023 tax return due date (including extensions), depending on whether the relinquished property was transferred or the EAT bought the replacement property in 2022 or 2023, respectively, or (b) one year.