Many disaster extensions have been granted by the IRS in 2020.  Accordingly, we thought it would be helpful to provide a summary of the relevant portions of Revenue Procedure 2018-58 that relate to 1031 Exchanges as well as how those provisions relate to disaster notices that are currently active.  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.

  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.
  1. 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).
  1. “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).

(as of November 18, 2020):

Louisiana – Hurricane Laura
Section 6 – Affected Taxpayers (residing or having a business in Acadia, Allen, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Cameron, Catahoula, Claiborne, Evangeline, Grant, Jackson, Jefferson Davis, Lafayette, La Salle, Lincoln, Morehouse, Natchitoches, Ouachita, Pointe Coupee, Rapides, Sabine, St. Landry, St. Martin, St. Mary, Union, Vermilion, Vernon, Webster, West Feliciana, and Winn parishes) – Deadlines falling between 8/22/2020 and 12/31/2020 are extended to 12/31/2020
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 8/22/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 12/31/2020 (whichever is later)

Alabama – Hurricane Sally
Section 6 – Affected Taxpayers (residing or having a business in Baldwin, Escambia and Mobile counties) – Deadlines falling between 9/14/2020 and 1/15/2021 are extended to 1/15/2021
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 9/14/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 1/15/2021 (whichever is later)

California – August Wildfires
Friday (11/13/2020), the IRS amended its disaster relief notice for California relating to the August wildfires to add Mendocino and Stanislaus counties. Affected Taxpayers (residing or having a business in Butte, Lake, Lassen, Mendocino, Monterey, Napa, San Mateo, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Trinity, Tulare 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 8/14/2020 and 12/15/2020 are extended to 12/15/2020. 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 8/14/2020 the 45 and 180-day deadlines that have not passed can be extended for 120 days or until 12/15/2020 (whichever is later).
Section 6 – Affected Taxpayers (residing or having a business Benton, Boone, Cedar, Clinton, Jasper, Linn, Marshall, Polk, Poweshiek, Scott, Story and Tama counties) – Deadlines falling between 8/14/2020 and 12/15/2020 are extended to 12/15/2020
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 8/14/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 12/15/2020 (whichever is later)

California – September Wildfires
Section 6 – Affected Taxpayers (residing or having a business in Fresno, Los Angeles, Madera, Mendocino, Napa, San Bernardino, San Diego, Shasta, Siskiyou and Sonoma counties) – Deadlines falling between 9/4/2020 and 1/15/2021 are extended to 1/15/2021
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 9/4/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 1/15/2021 (whichever is later)

Florida – Hurricane Sally
Section 6 – Affected Taxpayers (residing or having a business in Bay, Escambia, Okaloosa, Santa Rosa and Walton counties) – Deadlines falling between 9/14/2020 and 1/15/2021 are extended to 1/15/2021
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 9/14/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 1/15/2021 (whichever is later)

Iowa – August Derecho
Section 6 – Affected Taxpayers (residing or having a business Butte, Lake, Lassen, Monterey, Napa, San Mateo, Santa Clara, Santa Cruz, Solano, Sonoma, Trinity, Tulare and Yolo counties) – Deadlines falling between 8/10/2020 and 12/15/2020 are extended to 12/15/2020
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 8/10/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 12/15/2020 (whichever is later)

Louisiana – Hurricane Delta
Monday (11/16/2020), the IRS amended its disaster relief notice for Louisiana relating to Hurricane Delta to add Beauregard, Lafayette, Rapides, St. Landry and St. Martin parishes. Affected Taxpayers (residing or having a business in Acadia, Beauregard, Calcasieu, Cameron, Jefferson Davis, Lafayette, Rapides, St. Landry, St. Martin and Vermilion parishes) 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 10/6/2020 and 2/16/2021 are extended to 2/16/2021. 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 10/6/2020 the 45 and 180-day deadlines that have not passed can be extended for 120 days or until 2/16/2021 (whichever is later).
Section 6 – Affected Taxpayers (residing or having a business in Arcadia, Calcasieu, Cameron, Jefferson Davis and Vermillion Parishes) – Deadlines falling between 10/6/2020 and 2/16/2021 are extended to 2/16/2021
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 10/6/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 2/16/2021 (whichever is later)

Michigan – May Flooding
Section 17 – Affected Taxpayers (residing or having a business in Arenac, Gladwin. Iosco, Midland and Saginaw counties) and Non Affected Taxpayers – If RQ sold on or before 5/16/2020 the 180-day deadlines that have not passed could be extended for 120 days

Mississippi – Tornadoes
Section 17 – Affected Taxpayers (residing or having a business in Clarke, Covington, Grenada, Jasper, Jefferson Davis, Jones, Lawrence, Panola and Walthall counties) and Non Affected Taxpayers – If RQ sold on or before 4/12/2020 the 180-day deadlines that have not passed could be extended for 120 days

Oregon – February Flooding
Section 17 – Affected Taxpayers (residing or having a business in Umatilla County and the Confederated Tribes of the Umatilla Indian Reservation) and Non Affected Taxpayers – If RQ sold on or before 2/5/2020 the 180-day deadlines that have not passed could be extended for 120 days

Oregon – September Wildfires
Section 6 – Affected Taxpayers (residing or having a business in Clackamas, Douglas, Jackson, Klamath, Lane, Lincoln, Linn and Marion counties) – Deadlines falling between 9/7/2020 and 1/15/2021 are extended to 1/15/2021
Section 17 – Affected and Non Affected Taxpayers – If RQ sold on or before 9/7/2020 the 45 and 180-day deadlines that have not passed could be extended for 120 days or until 1/15/2021 (whichever is later)

South Carolina – April Storms
Section 17 – Affected Taxpayers (residing or having a business in Aiken, Barnwell, Berkeley, Colleton, Hampton, Marlboro, Oconee, Orangeburg and Pickens counties) and Non Affected Taxpayers – If RQ sold on or before 3/18/2020 the 180-day deadlines that have not passed could be extended for 120 days

Tennessee – March Tornadoes
Section 17 – Affected Taxpayers residing or having a business in Davidson, Putnam and Wilson counties) and Non Affected Taxpayers – If RQ sold on or before 3/3/2020 the 180-day deadlines that have not passed could be extended for 120 days

Tennessee – April Tornadoes
Section 17 – Affected residing or having a business in Bradley and Hamilton counties) and Non Affected Taxpayers – If RQ sold on or before 4/12/2020 the 180-day deadlines that have not passed could be extended for 120 days

Utah – Earthquakes
Section 17 – Affected Taxpayers (residing or having a business in Davis and Salt Lake counties) and Non Affected Taxpayers – If RQ sold on or before 4/12/2020 the 180-day deadlines that have not passed could be extended for 120 days

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