BIG NEWS!! 1031 has been extended to October 16, 2023 in California, READ BELOW!!

[Kenny Simpson]

The recently released update extension not only delays the tax filing deadline to October 16, 2023, it could also extend your 1031 Exchange deadlines until October 16, 2023 as well!

For example: Typically, if you were to close your investment property on April 1st, you would have until May 16th to identify property and September 28th to close (45 and 180 days respectively). With this recent extension however, you will now have until October 16th to both identify AND close your Replacement Property.

This will allow for clients that are doing 1031 Exchanges to take more time to do the due diligence on properties that they intend to purchase and potentially take advantage of lower interest rates, if rates start to decrease later in the year. Instead of rushing to find suitable Replacement Properties that meet your needs, you will now have a lot more time to make one of the biggest financial decisions of your life.

As you can see, now is an INCREDIBLE time to list and sell your investment property and exchange into a better performing asset.

[Rachel Fu]

I just closed my relinquished property in April and put my funds into exchange with IPX1031

The passage in your post, seems to be the same as one of IPX 1031's blog https://www.ipx1031.com/disast...

 and by the example in this paragraph, by I would have both my 45-day deadline (for identification of replacement properties) and 180-day deadline (closing of the replacement properties) extended.

Yet, another post by IPX 1031 https://www.ipx1031.com/disast... stated that I would have only my 45-day deadline extended, but not the 180-day deadline, because I sold the property after FEMA/IRS's disaster day.

1. Section 6 applies only to Affected Taxpayers as defined in the Disaster Relief Notice. Section 6 permits Affected Taxpayers that have a deadline falling between the Disaster Date in the Disaster Relief Notice and the last day of the Postponement Period to extend that deadline to the last day of the Postponement Period.

• Example 1: Disaster Date is June 14. Last day of the Postponement Period is October 15. Exchanger meets the definition of an “Affected Taxpayer” in the Disaster Relief Notice. Affected Taxpayer sells Relinquished Property on June 15 (AFTER the Disaster Date), and the 45th day is July 30. Under Section 6, the Affected Taxpayer may extend the Identification Period deadline to October 15, the last day of the Postponement Period. The 180th day is not extended.

Some other 1031 exchange intermediaries hold the same opinion:

Equity Advantage https://www.1031exchange.com/i...
Greenberg Glusker https://www.greenbergglusker.c...

However, some other companies are saying the opposite

First American Exchange Company https://www.firstexchange.com/...
Asset Preservation, Inc. https://apiexchange.com/disast...

Affected Taxpayers: An “Affected Taxpayer” includes individuals who live, and businesses whose principal place of business is located in, the Covered Disaster Area. Affected Taxpayers are entitled to relief regardless of where the relinquished property or replacement property is located.

There are prominent companies in both camps, and of course if you bring this discrepancy to any one of the them, they would say, consult your own CPA. Guess what, I asked a couple of CPAs, and got conflicting answers as well.

So I went ahead to look through all the IRS publications to find source of reference to why eligibility under Section 6 includes "exchange must have started before the Disaster Day" - no luck so far. So I am scratching my head as to what is the basis for either opinion...

So TLDR: Does anyone have a convincing answer - as I closed my relinquished property after the Disaster Day,(and of course I live in the covered state), do I have both 45-day and 180-day deadlines extended or 45-day deadline only?

[Dave Foster]

@Rachel Fu, The IRS disaster relief notices have become incredibly confusing as they have started to customize notices and actually use different criteria and different date ranges of relief than in the past.  You're not imagining the uproar in the tax industry caused by their inconsistencies.

The reason your 180th day is not extended is because it falls after the extended deadline.  The date of disaster in the example is June 14.  The extension is to Oct. 15. So, any time sensitive filing deadline for an affected taxpayer occurring between June 14 and October 15 can be extended to October 15.  The 45th day occurred on July 30 so it can be extended to October 15,  The 180th day doesn't happen until early December.  Since it does not occur during the period allowed.  It is not extended.

The real bonus benefit here is usually that the identification period is extended so much that it almost coincides with the exchange period.  In the example, an exchanger could purchase any property they want almost right up to their 180-day deadline.  Talk about mitigating risk of not finding a good replacement!!!!

[Alice Chen]

Quote from @Kenny Simpson:

The recently released update extension not only delays the tax filing deadline to October 16, 2023, it could also extend your 1031 Exchange deadlines until October 16, 2023 as well!

For example: Typically, if you were to close your investment property on April 1st, you would have until May 16th to identify property and September 28th to close (45 and 180 days respectively). With this recent extension however, you will now have until October 16th to both identify AND close your Replacement Property.

This will allow for clients that are doing 1031 Exchanges to take more time to do the due diligence on properties that they intend to purchase and potentially take advantage of lower interest rates, if rates start to decrease later in the year. Instead of rushing to find suitable Replacement Properties that meet your needs, you will now have a lot more time to make one of the biggest financial decisions of your life.

As you can see, now is an INCREDIBLE time to list and sell your investment property and exchange into a better performing asset.

Does it mean both original and replacement properties need to be in CA?

[Dave Foster]

@Alice Chen, There are different levels of relief.  Here's a link to the IRS site direct - https://www.irs.gov/newsroom/tax-relief-in-disaster-situations