Frequently, listing your property with the hopes of completing a 1031 Exchange can cause stress because of the 1031 Exchange deadlines.
However, that has temporarily changed due to the recent update to the disaster extensions impacting most counties in California and affected counties in Georgia and Alabama. If you are a resident of or have your principal place of business in California, Georgia or Alabama, you may be considered an “affected taxpayer” that is eligible to significantly extend the 1031 Exchange timelines. To determine if you are an “affected taxpayer” please review this blog post on our website and consult with your tax advisor.
The recently released update extension not only delays the tax filing deadline to October 16, 2023, it could also extend your 1031 Exchange deadlines until October 16, 2023 as well!
For example: Typically, if you were to close your investment property on April 1st, you would have until May 16th to identify property and September 28th to close (45 and 180 days respectively). With this recent extension however, you will now have until October 16th to both identify AND close your Replacement Property.
This will allow for clients that are doing 1031 Exchanges to take more time to do the due diligence on properties that they intend to purchase and potentially take advantage of lower interest rates, if rates start to decrease later in the year. Instead of rushing to find suitable Replacement Properties that meet your needs, you will now have a lot more time to make one of the biggest financial decisions of your life.
As you can see, now is an INCREDIBLE time to list and sell your investment property and exchange into a better performing asset. Please reach out to me for more information on how I can add value to you and your clients.
For more information on the extensions you can find the IRS disaster notices here, find more information on Disaster Relief Deadline Extensions here and read the summary below.
On 2/23/2023 and 2/24/2023, the IRS issued updates to the Disaster Notices for Alabama, both California notices (2022 winter storm and 2023 winter storm), and Georgia. Although all of the updates stated “this news release has been updated to change the filing and payment deadlines from May 15, 2023 to October 16, 2023” they also extended the 1031 deadlines to October 16, 2023. Accordingly the new deadlines are summarized below and can be found on the IRS site here.
Alabama
Affected Taxpayers (residing or having a business in Autauga, Barbour, Chambers, Conecuh, Coosa, Dallas, Elmore, Greene, Hale, Mobile, Morgan, Sumter and Tallapoosa counties) have the option to choose the relief in Section 6 OR Section 17 of Rev. Proc. 2018-58 (but not both). Pursuant to Section 6, deadlines falling between 1/12/2023 and 10/16/2023 are extended to 10/16/2023. Section 17 relief is available to Affected Taxpayers (who did not elect Section 6 remedies) and Non-Affected Taxpayers. Section 17 relief provides that If the relinquished property sold on or before 1/12/2023 the 45 and 180-day deadlines that have not passed can be extended for 120 days or until 10/16/2023 (whichever is later).
California – December 2022 winter storms
Affected Taxpayers (residing or having a business in Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Inyo, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Monterey, Napa, Nevada, Placer, Sacramento, San Benito, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, San Diego, San Francisco, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, and Yolo counties) have the option to choose the relief in Section 6 OR Section 17 of Rev. Proc. 2018-58 (but not both). Pursuant to Section 6, deadlines falling between 12/27/2022 and 10/16/2023 are extended to 10/16/2023. Section 17 relief is available to Affected Taxpayers (who did not elect Section 6 remedies) and Non-Affected Taxpayers. Section 17 relief provides that If the relinquished property sold on or before 12/27/2022 the 45 and 180-day deadlines that have not passed can be extended for 120 days or until 10/16/2023 (whichever is later).
California – January 2023 winter storms
Affected Taxpayers (residing or having a business in 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, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Tulare, Ventura, Yolo, and Yuba counties) have the option to choose the relief in Section 6 OR Section 17 of Rev. Proc. 2018-58 (but not both). Pursuant to Section 6, deadlines falling between 1/8/2023 and 10/16/*2023 are extended to 10/16/2023. Section 17 relief is available to Affected Taxpayers (who did not elect Section 6 remedies) and Non-Affected Taxpayers. Section 17 relief provides that If the relinquished property sold on or before 1/8/2023 the 45 and 180-day deadlines that have not passed can be extended for 120 days or until 10/16/2023 (whichever is later).
Georgia
Affected Taxpayers (residing or having a business in Butts, Crisp, Henry, Jasper, Meriwether, Newton, Pike, Spalding, and Troup counties) have the option to choose the relief in Section 6 OR Section 17 of Rev. Proc. 2018-58 (but not both). Pursuant to Section 6, deadlines falling between 1/12/2023 and 10/16/2023 are extended to 10/16/2023. Section 17 relief is available to Affected Taxpayers (who did not elect Section 6 remedies) and Non-Affected Taxpayers. Section 17 relief provides that If the relinquished property sold on or before 1/12/2023 the 45 and 180-day deadlines that have not passed can be extended for 120 days or until 10/16/2023 (whichever is later).
Since the extension periods are so long, taxpayers and their advisors need to be aware that section 17.02 of Revenue Procedure 2018-58 provides that the extension cannot extend beyond one year. This would apply to section 17 extensions where the relinquished property closed prior to October 16, 2022.
As always, exchangers should speak with their tax advisors to determine if they are eligible for an extension and if so, what their new deadline dates are. IPX1031 legal experts are always available to speak with tax advisors about the extension notices.
Read more:
Disaster Relief Extensions
Deadline Extension Summary PDF
IRS Disaster Notices
