Tax Relief in Disaster Situations
In order to qualify for an extension a taxpayer must have transferred their property to a buyer; or transferred “qualified indicia of ownership” to an Exchange Accommodation Titleholder pursuant to Rev. Proc. 2000-37 (i.e. reverse exchange) on or before the date of the federally declared disaster. In addition, the IRS must issue a news release, notice, or other guidance, providing relief for acts listed in Revenue Procedure 2018-58 and which specifies who is an “affected taxpayer.”
Please keep in mind that pursuant to Revenue Procedure 2018-58, section 17, a taxpayer who is not otherwise an “affected taxpayer” as defined in the IRS disaster relief guidance can be eligible for an extension of the 45-day identification deadline or 180-day exchange period deadline for a variety reasons, including, but not limited to: the relinquished or replacement property is located in the Presidentially declared disaster area; the principal place of business of any party to the transaction is located in the disaster area; or a lender will not fund the loan due to the disaster.
Accordingly, it is important to determine if you or your client is an “affected taxpayer” even if they are located far from the disaster area.
It is also important to note that the relief specified in Revenue Procedure 2018-58 does not necessarily “re-open” a 45 day identification period which expired prior to the disaster declaration unless an identified property was “substantially damaged” by the disaster. If the 45 day identification period expired prior to the disaster declaration the taxpayer will only get the benefit of an extension if they are otherwise an “affected taxpayer” as explained above. In many cases the taxpayer is only provided with an extension of time, generally 120 days, to acquire the replacement property.
For more information on Tax Relief in Disaster Situations please visit the IRS website at