In response to the effects of Hurricane Helene across the southern United States, the IRS has provided relief for taxpayers in affected areas. This relief includes an extension for certain taxpayers who are in the process of completing a 1031 exchange, offering additional time for both the 45-day identification period and the 180-day completion period.
Extension Details
The requirements for a valid 1031 exchange require you to identify a replacement property within 45 days of the transfer of relinquished property and close on the replacement property within 180 days of the sale of the relinquished property.
The recently issued IRS relief will extend both deadlines to May 1, 2025, if the original 45- or 180-day deadlines are due to be performed on or after the “disaster date” and before May 1, 2025. The disaster dates for each state are:
- Alabama — September 22, 2024
- Florida — September 23, 2024
- Georgia — September 24, 2024
- Virginia, North Carolina, and South Carolina — September 25, 2024
- Tennessee — September 26, 2024
Covered Disaster Areas
The extension applies to all individuals and businesses located in these disaster areas, which include: Alabama, Georgia, North Carolina, South Carolina, and parts of Florida, Tennessee, and Virginia. Please refer to the IRS announcement for state-specific details on the counties included in the relief.
Who Qualifies?
An “affected taxpayer” is any individual or business whose principal location is within a designated disaster area. While this is the main qualification, there are various ways to meet the criteria. Taxpayers in these areas are eligible for relief, even if their replacement or relinquished property is located elsewhere. This also applies to properties in affected regions or to taxpayers whose records or tax professionals are in impacted areas, even if the taxpayer’s primary location is not.
If you believe a disaster impacts you but are outside a designated disaster area, consult your tax advisor for guidance. For a full list of covered disaster areas that qualify for relief, see the IRS guidelines.
Extension Options
1. General Postponement
- Eligibility: This option applies only to affected taxpayers and can be used whether the 1031 exchange began before or after the disaster.
- Deadline Extensions: Any 45-day identification or 180-day exchange deadline that falls between the Disaster Date and May 1, 2025, is extended to May 1, 2025. Deadlines after this date are not affected.
2. Alternative Extension
- Eligibility: Available to affected taxpayers or those who meet the criteria in Revenue Procedure 2018-58, Section 17. To qualify, the relinquished property must have been transferred (or parked property acquired in a reverse exchange) on or before the Disaster Date.
- Deadline Extensions: Any 45-day or 180-day deadline that falls on or after the Disaster Date is extended to the later of May 1, 2025, or 120 days from the original deadline.*
*Note that extensions cannot exceed one year or the due date (including extensions) of the tax return for the year of disposition. Additionally, the 45-day identification period is extended if a replacement property identified before the Disaster Date is substantially damaged by the hurricane.
How Can 1031 Crowdfunding Help?
Section 1031 exchanges are complex, and recent natural disasters have added further complications. If you believe you qualify as an affected taxpayer, consult your tax advisor promptly for further information as soon as possible.
1031 Crowdfunding is a real estate investment firm that specializes in 1031 exchanges. Our team of real estate experts have the experience necessary to assist you in navigating the intricacies of your exchange. With ready-to-invest offerings, our platform eliminates typical closing risks and delays, allowing many of our clients to close within just 3-5 days.
Note: the IRS may update the extensions or add more disaster areas to the relief without issuing a new notice. Check the IRS websites periodically for updates if this situation impacts you.
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