Natural disasters can disrupt the normal course of business and prevent taxpayers from meeting crucial deadlines to file returns, pay taxes and implement tax deferral strategies such as 1031 exchanges. In order to assist taxpayers affected by Hurricane Irene in Vermont, North Carolina, New Jersey, New York State and Puerto Rico, the Internal Revenue Service (IRS) has recently issued a written tax relief confirmation for disaster-impacted counties. Additional states may be included in a later revision of the relief.
The notice posted on the IRS web site page allows taxpayers who live in the covered disaster area and businesses that provide time-sensitive acts in those locations, to postpone the time to file returns, pay taxes and to meet deadlines in 1031 exchanges. Taxpayers who do not live in the specified counties but whose records necessary to meet a deadline listed in Treasury Regulation § 301.7508A-1(c) in the covered disaster area qualify for the tax relief. Additionally, any individual visiting the eligible disaster area who was injured as a result of the disaster qualifies for tax relief.
Special Rules for Section 1031 Like Kind Exchanges
Revenue Procedure 2007-56 Section 17 defines special rules for 1031 like kind exchanges including:
- Last day of the 45-day identification, 180-day exchange period and the last day of a reverse exchange that fall on or after a Presidentially declared disaster are postponed 120 days or the last day of the extension period authorized by the IRS official announcement.
- Lender and title insurance company who do not fund or provide required title policy to close a real estate transaction due to the disaster.
If you or your Qualified Intermediary qualifies for disaster relief, contact your CPA to confirm that you are entitled to the extension. Rely only on the official written notice issued by the IRS.
In the past, clients of Atlas 1031 Exchange have been entitled to the extension marking in red “Hurricane Tax Relief” on the first page of their federal tax return. It is important to understand the requirements that you need to meet to qualify and how the extension affects your 1031 exchange time-sensitive dates. Continue to check the IRS web site for updates and revisions.
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