IRS Alert: 45-Day and 180-Day 1031 Extensions for Wildfire Disaster Victims in California

August 26, 2020

California counties in the “Covered Disaster Area” as of August 26, 2020: Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties.

Victims of the California wildfires that began on August 14, 2020 may qualify for tax relief from the Internal Revenue Service. Following the recent disaster declaration for individual assistance issued by the Federal Emergency Management Agency (FEMA), the IRS announced that affected taxpayers in certain areas will receive tax relief.

Individuals and households who reside or have a business in Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties qualify for tax relief. Taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief.

Visit the IRS website for more information about IRS Revenue Procedure 2018-58, Section 17 and disaster-related notices and updates including additional areas covered and new extensions.

Tax Help for California Wildfire Victims
https://www.irs.gov/newsroom/tax-help-for-california-wildfire-victims

Tax Relief in Disaster Situations
https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

Both of the following criteria must be met to be eligible for an extension under Revenue Procedure 2018-58, section 17:

The taxpayer is located in the Covered Disaster Area or is otherwise an affected taxpayer as defined in the Notice, regardless of where the relinquished property or replacement property is located, or otherwise has difficulty meeting the exchange deadlines under the conditions in Revenue Procedure 2018-58, section 17;

AND
The relinquished property was transferred (or the parked property was acquired by the EAT in a reverse exchange under Revenue Procedure 2018-58) on or before the Disaster Date listed in the Notice. Note that some disasters occur on a single date; others, such as flooding, occur over a period of days and the Disaster Date above is preceded by beginning.

IF the taxpayer meets these criteria, THEN any 45-day or 180-day deadline that falls on or after the disaster date is extended to THE LONGER OF:

120 days from such deadline

OR
The extension date listed in the Notice [December 15, 2020]. Note the date may not be extended beyond one year or the due date (including extensions) of the tax return for the year of the disposition of the relinquished property (typically, if an extension was filed, 9/15 for corporations and partnerships and 10/15 for other taxpayers).

This disaster relief is optional. Exchangers that are “affected taxpayers” must advise their Qualified Intermediary that they are eligible for disaster relief, and that their exchange deadline(s) are extended, otherwise the original 45-day and 180-day deadlines will control.