Our thoughts and prayers continue to go out to those affected by Hurricane Sandy. We routinely tell Exchangers there are no extensions to the 45-Day Identification and 180-Day Exchange Periods except in the event of a Presidentially declared disaster. Today we will discuss Revenue Procedure 2005-27 which provides extensions to your 45-day identification and 180-day exchange period deadlines in the unfortunate event that you are affected by a Presidentially declared disaster. Extensions are not automatic and they do not apply to state or local states of emergency or all federal disasters. IRS issues a Notice or News Release listing the affected areas. A list of affected areas can be found on Tax Relief in Disaster Situation page on the IRS website.
Some of the covered disasters in the past have involved hurricanes, tornados, wild fires, tropical storms, flooding and 9/11.
Extensions apply to reverse and delayed 1031 exchanges and provide the greater of either a 120-day extension or until the specific deadline date provided in the extension.
Exchangers that may qualify for an extension are defined as follows: (a) An “affected taxpayer” as defined in IRC section 301.7508A-1(d)(1) of the Procedure and Administration Regulations; or (b) Has difficulty meeting the 45-day identification or 180-day exchange deadlines for the following or similar reasons:
(i) The relinquished property or the replacement property is located in a covered disaster area;
(ii) The principal place of business of any party to the transaction (for example, the qualified intermediary, exchange accommodation titleholder, transferee, settlement attorney, lender, financial institution, or a title insurance company) is located in the covered disaster area;
(iii) Any party to the transaction (or an employee of such a party who is involved in the 1031 exchange transaction) is killed, injured, or missing as a result of the Presidentially declared;
(iv) A document prepared in connection with the exchange (for example, the agreement between the transferor and the qualified intermediary or the deed to the relinquished property or replacement property) or a relevant land record is destroyed, damaged, or lost as a result of the Presidentially declared disaster;
(v) A lender decides not to fund either permanently or temporarily a real estate closing due to the Presidentially declared disaster or declared disaster or refuses to fund a loan to the taxpayer because flood, disaster, or other hazard insurance is not available due to the Presidentially declared disaster; or
(vi) A title insurance company is not able to provide the required title insurance policy necessary to settle or close a real estate transaction due to the Presidentially declared disaster.
The extension also applies to relief workers affiliated with recognized charities and government agencies assisting in the affected area.
Note that it is imperative you notify your 1031 CORP. Exchange Officer if you have been affected by Sandy because it is impossible for us know, especially if the disaster area is not where your exchange properties are located.
The IRS disaster help line is 1-866-662-5227.
