**Disclaimer- We are not tax professionals so please do not interpret this as tax advise! Please confirm all information with a trusted tax professional!**
The recent wildfires sweeping through Los Angeles have left devastating effects on the community, displacing families, disrupting businesses, and causing immense financial strain. For individuals and businesses engaged in 1031 exchanges (like-kind exchanges), these challenges are further compounded by the tight deadlines inherent to the process. To provide some relief, the IRS has implemented disaster relief provisions, offering extensions on key deadlines to help taxpayers navigate this difficult time. Here’s what you need to know.
Taxpayers involved in 1031 exchanges (like-kind exchanges) who are considered affected taxpayers may receive additional time to complete their exchange under the disaster relief provisions outlined by the IRS.
Here’s how this applies:
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Who Qualifies for Relief:
- Taxpayers directly affected by a federally declared disaster and living or operating a business in a covered disaster area qualify.
- Taxpayers outside the disaster area but whose necessary records are located within the covered area also qualify.
- Relief workers and certain individuals impacted by the disaster may also qualify.
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Extension for Time-Sensitive Acts:
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Under Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, affected taxpayers are granted additional time to complete time-sensitive acts, including the deadlines related to 1031 exchanges:
- The 45-day identification period to identify replacement property.
- The 180-day exchange period to complete the exchange.
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The extensions apply to acts required to be performed on or after Jan. 7, 2025, and before Oct. 15, 2025. For affected taxpayers, these deadlines are postponed until Oct. 15, 2025.
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Specific Considerations for 1031 Exchanges:
- If the original deadlines for identifying replacement property or completing the exchange fall within the disaster relief period, the deadlines are automatically extended until Oct. 15, 2025 for eligible taxpayers.
- Taxpayers must check whether their transaction qualifies under section 17 of Rev. Proc. 2018-58, which addresses like-kind exchanges during disaster relief periods.
Key Takeaway: Affected taxpayers in a covered disaster area or meeting other eligibility criteria have additional time to complete their 1031 exchange, as long as the deadlines fall within the relief period. You should confirm your eligibility and the specific disaster designation affecting your area to ensure compliance with these extended deadlines.
