From time to time we are asked “Can I have more than the specified 180 days to close on my exchange replacement property?” The answer has always been “No”. Failure to comply with the statutory deadlines will result in a failed exchange. No extension is permitted in a situation involving a single taxpayer’s inability to comply with the exchange deadlines. However, in recent years, the government has recognized the inability of some taxpayers to comply with tax filing deadlines as a consequence of catastrophic events which affect large numbers of people, such as terrorist actions, hurricanes, tornados, wildfires and floods.

Section 17 of Revenue Procedure 2007-56 provides postponement provisions specific to 1031 exchange deadlines that apply in the case of federally declared disasters (sometimes referred to as Presidentially declared disasters), but only if the IRS issues an official notice. That section extends the 45 and 180-day periods in forward and reverse exchanges (that fall on or after the date of a federally declared disaster) by the later of 120 days or the date specified in the relevant IRS News Release (Tax Relief Notice), but not beyond the due date for filing the tax return for the year of the transfer.

In the aftermath of an event, the IRS will issue a Tax Relief Notice identifying counties state by state which have been declared disaster areas. The IRS frequently updates Disaster Relief Notices on its website, http://www.irs.gov/uac/Tax-Relief-in-Disaster-Situations, to include additional affected counties. Note that the Tax Relief Notice must specifically state that it provides relief under 17 of Rev. Proc. 2007-56 in order for the notice to apply to like-kind exchanges. Also note that FEMA disaster notices, which are typically published well before IRS Tax Relief Notices, do not have any effect upon exchange deadlines.

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