Authored by Tim R. Plewe
The IRS recently issued an extension of the 45-day and 180-day deadlines for 1031 exchanges for taxpayers residing in, or whose principal place of business or books and records are located in counties affected by the recent severe winter storms, flooding and mud slides throughout California (listed below).
The 45-day identification period for the exchange for those who began a 1031 exchange between November 24, 2022 and January 8, 2023 is moved to the later of May 15, 2023 or 120 days after the original 45-day deadline for identification. The 180-day exchange period for those who began an exchange between July 12, 2022 and January 8, 2023 is moved to the later of May 15, 2023 or 120 days after the original 180-day deadline date. These extensions provide assistance for both forward and reverse exchanges. For a forward exchange the relinquished property must have been transferred no later than January 8, 2023. For a reverse exchange the exchange accommodation titleholder must have acquired the replacement property or the relinquished property no later than January 8, 2023.
The threshold for eligibility for the extensions is fairly low. To be eligible as an affected person a taxpayer must reside in an affected area, have its principal place of business in an effected area, be a relief worker assisting others in an affected area or maintain books and records in an affected area. A taxpayer can also be eligible as a person having difficulty meeting deadlines if the relinquished property or replacement property is located in an affected area or the principal place of business of any party to the transaction (including the exchange accommodator, escrow, title company, lender and others) is located in affected area, as well as other reasons listed in Rev. Proc. 2018-58. If their property was sold in 2022, the taxpayer also must be aware that the deadlines may not be extended beyond the due date (including extensions) of the taxpayer’s 2022 tax return, which may require the filing of an extension to take advantage of extended deadlines.
If a taxpayer sold their relinquished property after January 8, 2023, and the 45-day identification deadline is set to occur prior to May 15, 2023, there is some limited relief, as the 45-day identification period is extended to May 15, 2023 for those deemed an affected person. Keep in mind that this extension does not apply to those deemed only to be persons having difficulty meeting deadlines discussed above.
If you have any questions regarding your 1031 exchange, including whether or not these extensions apply to you, please contact our office.
Counties deemed to be affected areas: 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