New IRS Rules for 1031 Exchanges in Counties Suffering Storm Damage

Naheed AmdaniNo CommentsReal Estate, Uncategorized

Because of the severe storms, flooding and tornadoes in the midwest, the IRS is providing extensions to people or entities attempting a 1031 exchange in certain affected counties in Illinois, Indiana, Iowa, Missouri and Wisconsin. These extensions will allow people to search for or close on appropriate exchange properties without missing the strict IRS deadlines (45 days from the date of your original sale to identify exchange property, and 180 days from the date of your original sale to close — for more general information on the 1031 exchange process, click here).

So who is eligible for these extensions? Well, first of all, you must be an affected potential exchangor. An affected potential exchangor is anyone (a) who lives in or has its primary place of business in one of the affected counties (see the list below) or (b) who keeps his books or records in an affected county, or (c) whose tax professional’s office is in an affected county. Second, you must have sold or exchanged your property prior to the effective disaster date (June 1, 2008 in Illinois). Third, your 45-day identification deadline or your 180-day closing deadline must fall on or after June 1, 2008. If you meet all three of these conditions, you will receive a 120 day extension of any 45-day or 180-day deadline that falls after June 1, 2008.

Which counties are considered affected counties? In Illinois, Adams, Clark, Coles, Crawford, Cumberland, Douglas, Edgar, Hancock, Henderson, Jasper, Lake, Lawrence, Mercer and Winnebago counties are all affected counties. There is a possibility that more counties will be added later. Cook County is not considered an affected county.

All other standard conditions that apply to 1031 exchanges (see here) must be met regardless of any extension allowed. The IRS is trying hard to be flexible and allow people who suffered recent storm damage to get back on track. People who are eligible for the extension and still wish to complete a 1031 exchange should act promptly!