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 Presidentially declared disaster.

Please keep in mind that pursuant to Revenue Procedure 2007-56, section 17, a taxpayer can be an “affected taxpayer” 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 Revenue Procedure 2007-56 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
https://www.irs.gov/newsroom/tax-relief-in-disaster-situations