Relief from the impact of weather is not something we expect from the Internal Revenue Service; hearing from them is more often than not receiving a disturbing letter in the mail. But sometimes we get surprised. Politicians wanting to defund the IRS for collecting taxes will be even more surprised.
In this case the surprise is an announcement that impacts real estate investors who started a 1031 exchange just as severe storms and flooding descended on the areas where their businesses are located, impacting their ability to initiate or complete transactions that involve selling one property and buying another, deferring the gain on the property sold until the replacement property is sold.
In each case the IRS has granted additional time to complete exchanges that were initiated but could not be completed in time, avoiding the potential pain of tax benefit losses because transactions could not close in the time required by IRS regulations. Interestingly, the extensions are based on the principal place of business of the investor, not the location of the exchanged property or the relinquished property. I guess the rationale is if you couldn’t go there because you were canoeing to your local supermarket, you likely couldn’t complete the deal on a timely basis.
The states that were named in the extensions and the time periods triggered by the extensions are:
- Illinois, between July 25 and 28, 2022
- Florida, beginning November 7, 2022
- New York, beginning November 18, 2022, and again beginning December 23, 2022, and
- California, beginning January 8, 2023.
The extension announcements specify counties within each state that are included in the extension authorization, but it’s too detailed to list them here. If you have initiated an exchange that got snagged or delayed in any of those states due to weather, reach out to your tax professional or your exchange accommodator – we use First American Exchange Company – for details and the process for taking advantage of the extensions.
And if you were not impacted by the weather in a real estate transaction, but are thinking about it, be sure to read my November 23, 2022 post on the real estate investing climate at https://www.cfoforrent.com/blog/. How do we keep up with this stuff?
We are Your CFO for Rent.