September 27, 2024

Recently, the IRS issued tax relief that can extend/postpone the 45-day and 180-day deadlines applicable to ongoing Section 1031 exchanges for severe storms and flooding that began on August 18^th, 2024 (Notice NY-2024-08 and CT-2024-11). Each Relief Notice provides universal tax relief for affected taxpayers that can extend the deadlines to file various individual and business tax returns and to make tax payments. Updated Notices can be found on the IRS website.For background regarding this tax relief and additional considerations, please review the linked IRS disaster guidance.

An affected taxpayer transacting a 1031 exchange has two potential extension options pursuant to the Federal Relief. Dependent on when the exchange commenced, they could qualify for one or both options explained in our disaster page linked here. “General Relief” is typically a fixed extended deadline pursuant to an IRS Notice. “Extended Relief” per Section 17 of Revenue Procedure 2018-58 is a more fact specific scenario and involves calculating an extended deadline by adding 120-days to an eligible exchange deadline.

NEW YORK (NY-2024-08) Severe Storms, Flooding:

Notice posted September 10, 2024, currently covers Suffolk County NY. Relief for individuals and businesses that were affected by severe storms and flooding that began on Aug. 18, 2024. Affected taxpayers now have until February 3, 2025,to file various federal individual and business tax returns. To learn more about the relief and specific areas affected, see the IRS website here.

CONNECTICUT (CT-2024-11) Severe Storms, Flooding, Mudslides:

Notice posted September 10, 2024, currently covers Fairfield, Litchfield, and New Haven Counties. Relief for individuals and businesses that were affected by severe storms, flooding, landslides, and mudslides that began on Aug. 18, 2024. Taxpayers now have until February 3, 2025, to file various federal individual and business tax returns. To learn more about the relief and specific areas affected, see the IRS website here.

Options and Key Dates:

1) Deadlines falling on or after August 18, 2024 – General Relief Extension until February 3, 2025 only.

2) Exchanges started on or before August 18, 2024 – may qualify for both options, including Extended Relief described below.

Extended Relief under Rev. Proc. 2018-58

In addition to any applicable General Relief, affected taxpayers and impacted exchangers who started their exchange on or before the disaster date qualify for extended relief pursuant to Rev. Proc. 2018-58, Section 17.

“Impacted 1031 Exchangers” – It is important to note that under Rev. Proc. 2018-58, Section 17, expanded relief is available for qualifying taxpayers transacting a 1031 exchange who are domiciled outside of the disaster area. Impacted 1031 Exchangers can qualify for relief based on a variety of reasons, as explained in Section 17. Our website features an extension calculator for those who qualify for Section 17 Relief.

*Eligibility for disaster extensions could vary on a case-by-case basis and the Covered Disaster Areas specified in IRS guidance are often updated over time. Exchangers and their advisors should carefully review any IRS guidance regarding disaster relief and make any determinations accordingly. When considering the impact of these disasters, it is important to determine if you or one of your clients is an affected taxpayer or otherwise eligible for tax relief, even if located far from the disaster area. If so, you should promptly contact your 1031 qualified intermediary.

If you are a current client, your tax advisor believes that you are eligible for this relief, and you have decided to apply it to your exchange, please contact our office at 877-701-1031, ext. 1, to notify us and discuss.