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Disaster Relief Bulletin: January 2024

In the wake of recent natural disasters, the IRS has rolled out critical tax relief measures that directly impact individuals and businesses engaged in Section 1031 like-kind exchanges. These measures are particularly pertinent for those transactions already underway, providing potential extensions for the critical 45-day identification and 180-day completion deadlines that are foundational to the 1031 exchange process.

The IRS has issued several notices in response to severe weather events across various regions, offering universal tax relief. This relief not only extends the deadlines for filing a range of individual and business tax returns but also includes provisions for making tax payments. The most current and comprehensive list of these notices, detailing the scope and terms of the relief, is readily available on the official IRS website.

For those looking for an in-depth understanding of this tax relief, including its broader implications and how it may apply to specific circumstances, the IRS has published detailed disaster guidance. This resource is invaluable for grasping the nuances of the relief measures and ensuring compliance with the altered deadlines.

Specifically, in Connecticut, following severe storms, flooding, and concerns over a potential dam breach that commenced on January 10, 2024, the IRS has granted an extension until June 17, 2024, for filing various federal tax returns for affected individuals and businesses. This extension is a significant reprieve for those grappling with the aftermath of these severe weather events. Further details can be found on the IRS website.

Rhode Island has also been acknowledged by the IRS in the wake of severe storms, flooding, and tornadoes that began on September 10, 2023. Similar to Connecticut, taxpayers in Rhode Island have been afforded an extension until June 17, 2024, for the submission of certain federal tax returns, providing much-needed breathing room for recovery and compliance efforts. More information is available on the IRS website.

Beyond these specific instances of General Relief, the IRS acknowledges that taxpayers who initiated their exchanges prior to the disaster occurrences might be eligible for additional relief under the provisions of Rev. Proc. 2018-58, Section 17. It’s important to note that eligibility for these extensions can be highly individualized, depending on the specifics of each case. Furthermore, the areas designated as Covered Disaster Areas by the IRS are subject to change, necessitating ongoing vigilance and review of IRS communications regarding disaster relief.

Given these complexities, it is crucial for taxpayers, especially those engaged in or considering a Section 1031 exchange, to carefully evaluate the potential impact of these disasters on their tax obligations and exchange timelines. This evaluation should extend beyond the immediate vicinity of the disaster areas, as eligibility for tax relief can sometimes apply to taxpayers located in regions not directly affected by the disasters.

For clients of 1031 Exchange Place currently engaged in an exchange, if your tax advisor has determined that you qualify for this disaster-related tax relief and you wish to apply it to your ongoing exchange, we urge you to contact our office promptly. By doing so, we can ensure that your exchange process is adjusted in accordance with these extensions, providing you with the support and guidance necessary during this challenging time. Please reach out to us to discuss your situation and next steps.