Rare IRS deadline extension...

IRS extends 1031 deadlines due to a RARE special circumstance...

In a VERY rare move, the IRS granted deadline extensions to some taxpayers for their 1031 exchanges. The IRS granted the extensions due to the hardships caused by Hurricane Charley and Tropical Storm Bonnie.

The IRS doesn't make the rules, but is required to enforce them. It's like a traffic cop monitoring people evacuating an area where a storm is approaching; he can't change the speed limit, but he can choose to extend grace to victims by not writing the ticket. In this special circumstance, the IRS has chosen not to enforce tax deadlines in 26 select Florida counties.

Normally in a Section 1031 exchange, a taxpayer/exchanger must properly identify their replacement or New Property within 45 days of the closing of their relinquished or Old Property. Then they must close on the purchase of exchange property(ies) within 180 days from the date of their closing on the sale of their Old Property. Federal tax code allows no exceptions to these deadlines! However, the IRS enforces the tax code, and can grant extensions of the deadlines by simply not enforcing them until a later date. Such is the case here.

The IRS recently announced that it has granted tax relief for taxpayers in 26 Florida counties, including relief for exchangers from their 45 and 180-day exchange deadlines. The relief period runs from August 11, 2004 to October 15, 2004. From our reading of the announcement, any 45 or 180 day deadline occurring between these two dates may be eligible to be extended until October 15.
Special tax relief for taxpayers in the presidentially declared disaster areas of 26 Florida counties:

  • Pasco
  • Brevard
  • Duval
  • Highlands
  • Manatee
  • Polk
  • Charlotte
  • Flagler
  • Indian River
  • Monroe
  • St. Johns
  • Collier
  • Glades
  • Lake
  • Okeechobee
  • Sarasota
  • DeSota
  • Hardee
  • Lee
  • Orange
  • Seminole
  • Dixie
  • Hendry
  • Levy
  • Osceola
  • Volusia

We urge anyone who might be affected by this announcement to consult with an independent tax and/or legal advisor. In this instance especially, the relief provisions are not entirely defined and each situation may require careful consideration of the available options. For further information from the IRS directly, you may refer to the following information posted on the IRS website:

Tax Relief: Presidentially Declared Disaster Areas

IRS Grants Tax Relief for Tropical StormsÁ Victims
IR-2004-108, Aug. 16, 2004 (Updated 8/24/04 to add Flagler County)

Remember: grace is free but it isn't cheap. The traffic cop can still write the ticket if the evacuee is taking advantage of the storm by going 100mph.

If you have any further questions about this, you may also call a consultant at The 1031 Exchange Experts, toll-free at 866-694-0204 to get more information.

--The Experts

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