The IRS further postponed the 10/16/2023 tax deadlines for most of California to 11/16/23. This surprise announcement was made by the IRS on the afternoon of 10/16/23. The postponement should include 45-day and 180-day deadlines for Section 1031. The IRS notice states that “time-sensitive tax-related actions also qualify for the extra time”.

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.

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 is postponed to the General Postponement Date. 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. 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 General Postponement Date.

Please see Revenue Procedure 2018-58, Section 17, and the Notices shown on https://www.irs.gov/newsroom/tax-relief-in-disaster-situations.

As always, exchangers should speak with their tax advisors to determine if they are eligible for an extension and if so, what their new time deadlines are.

If applicable to 1031 deadlines, the dates relating to the December 2022, January 2023, and March 2023 storms would be extended to November 16, 2023. The affected counties in each notice are listed below:

December 2022 storms
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.

January 2023 storms
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.

March 2023 storms
Alpine, Amador, Butte, Calaveras, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Los Angeles, Madera, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Nevada, Orange, Placer, Plumas, Sacramento, San Benito, San Bernardino, San Francisco, San Joaquin, San Mateo, San Luis Obispo, Santa Barbara, Santa Clara, Santa Cruz, Sierra, Sonoma, Stanislaus, Trinity, Tulare, Tuolumne and Yuba counties.

1. “Affected Taxpayers” that meet the definition in the Disaster Relief Notice may choose the relief provided in either Section 6 OR Section 17 of Rev. Proc. 2018-58.
2. Section 6 applies only to Affected Taxpayers as defined in the Disaster Relief Notice. Section 6 permits Affected Taxpayers that have a deadline falling between the Disaster Date in the Disaster Relief Notice and the last day of the Postponement Period to extend that deadline to the last day of the Postponement Period.

• Example 1: Disaster Date is June 14. Last day of the Postponement Period is October 15. Exchanger meets the definition of an “Affected Taxpayer” in the Disaster Relief Notice. Affected Taxpayer sells Relinquished Property on June 15 (AFTER the Disaster Date), and the 45th day is July 30. Under Section 6, the Affected Taxpayer may extend the Identification Period deadline to October 15, the last day of the Postponement Period. The 180th day is not extended.

3. Section 17 of the Rev. Proc. applies to “Affected Taxpayers” as defined in the Disaster Relief Notice and “Non-Affected Taxpayers” who meet certain criteria. However, for Section 17 to apply, the Relinquished Property must have been transferred, or the parked property parked ON OR BEFORE the Disaster Date. Section 17 permits the taxpayer to extend both 1031 deadlines for 120 days or until the last day of the Postponement Period (whichever is later). NOTE: The extension may not go beyond: (a) the due date (including extensions) of the taxpayer’s tax return for the year of the transfer or (b) one year (§17.02).

• Example 2: Same facts as Example 1. Affected Taxpayer cannot benefit from Section 17 extensions because the exchange began AFTER the Disaster Date. Affected Taxpayer does not receive a 120-day extension.
• Example 3: Same facts as Example 1 except that Affected Taxpayer sells Relinquished Property on June 1 (BEFORE the June 14 Disaster Date). The 45th day is July 16 and the 180th day is November 28. If Affected Taxpayer chooses Section 17 relief, then both the 45 and 180-day deadlines qualify to be extended for 120 days or until the last day of the Disaster Period (whichever is later).

4. “Non-Affected Taxpayers” meeting the criteria set forth in Section 17 and whose exchange commenced ON OR BEFORE the Disaster Date, may qualify for 120 day extensions of either or both of the 45 and 180 day deadlines, but cannot qualify for any relief under Section 6. Additionally, to qualify for the extension under Section 17, Non-Affected Taxpayers must have difficulty meeting the 45-day and 180-day deadlines because of the disaster, for the any of the reasons set forth in the Revenue Procedure (see this attached summary).

FEBRUARY 2023

Recent IRS Disaster Notices Extend 1031 Deadlines in California, Alabama and Georgia

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!

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.