IRS Approves 1031 Extensions for Taxpayers Affected by California Wildfires
On January 10, 2025, the IRS announced tax relief for taxpayers impacted by wildfires in California. The disaster declaration issued by the Federal Emergency Management Agency (FEMA) permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in Los Angeles County. As a result, affected taxpayers have the option to choose the relief in Section 6 OR Section 17 of Rev. Proc. 2018-58.
Section 6 – Section 6 relief is available only to affected taxpayers and provides that deadlines falling between the disaster date of 1/7/2025 and 10/15/2025 (the last day of the postponement period) are postponed to 10/15/2025.
Section 17 – Section 17 relief is available to affected taxpayers who did not elect Section 6 remedies and non-affected taxpayers who meet certain criteria. Section 17 relief provides that if the relinquished property is sold on or before the disaster date of 1/7/2025, the 45 and 180-day deadlines that have not passed are postponed for 120 days or until 10/15/2025 (whichever is later). However, the postponement may not go beyond the due date (including extensions) of the taxpayer’s tax return for the year of the transfer OR one year.
To qualify for the extension under Section 17, non-affected taxpayers whose exchange commenced on or before the disaster date of 1/7/2025 must have difficulty meeting the 45-day and 180-day deadlines because of the disaster for the any of the following or similar reasons:
The relinquished property, the replacement property, or the principal place of business of any party to the transaction is located in the disaster zone
Party to the transaction is killed, injured, or missing due to the disaster
Necessary documents relevant to the exchange or relevant land records are destroyed, damaged, or lost due to the disaster
Lender won’t fund or title insurance policy cannot be issued due to the disaster
For more information on the extension and how to take advantage of this IRS disaster relief, give our team a call. We can help you determine if you or your client are eligible for an extension and if so, what your new exchange deadline will be.
Disaster relief can be authorized by the IRS only after FEMA has issued a disaster declaration identifying the covered areas for relief. These special tax law provisions grant taxpayers affected by a federally declared disaster additional time to file returns, pay taxes, and perform other time-sensitive acts. In this short clip, Russell Marsan shares the history of IRS-approved deadline extensions and breaks down their direct impact on 1031 Exchange deadlines.
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