IRS Provides Extensions for Disasters in TX, OK, LA, and MS

The IRS recently issued notices regarding relief available due to disasters in Texas, Oklahoma, Louisiana, and Mississippi. The relief includes extensions for taxpayers completing 1031 exchanges. See the IRS Notices at https://www.irs.gov/newsroom/tax-relief-in-disaster-situations. Taxpayers may qualify for relief under either Section 6 or Section 17 of Revenue Procedure 2018-58, as described below.

Texas: The IRS issued Notice TX-2021-02, which extends the 45-day and 180-day deadlines for the entire state of Texas due to the winter storm that began February 11, 2021.

Oklahoma: The IRS issued Notice OK-2021-01, which extends the 45-day and 180-day deadlines for the entire state of Oklahoma due to the winter storm that began February 8, 2021.

Louisiana: See IRS Notice LA-2021-01, which extends the 45-day and 180-day deadlines due to Hurricane Zeta that began on October 26, 2020, as to the following parishes: Acadia, Allen, Ascension, Assumption, Beauregard, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Landry, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana.

Mississippi: See IRS Notice MS-2021-01, which extends the 45-day and 180-day deadlines due to Hurricane Zeta that began on October 28, 2020, as to the following counties: George, Greene, Hancock, Harrison, Jackson, and Stone.

Disaster Date: For each of the above states, the “Disaster Date” is in bold.

Covered Disaster Area: Currently, the “Covered Disaster Area” for each state is the counties or parishes listed above.

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.

Option One (General Postponement under Section 6):

1. Qualification: Only Affected Taxpayers qualify under this option and may exercise this option regardless of whether the exchange began before or after the Disaster Date.
2. Extensions:Any 45 or 180-day deadline that falls on or after the Disaster Date (and before the extended deadline date set forth in the Notice) is extended to the date set forth in the Notice (only) – that is to June 15, 2021, for Texas and Oklahoma, and to March 1, 2021 for Louisiana and Mississippi.

Option Two (Alternative Extension under Section 17):

1. Qualification: In order to qualify under this option, the taxpayer must (1) be an Affected Taxpayer, or (2) otherwise have difficulty meeting the 45 or 180-day deadlines under the conditions outlined in Rev. Proc. 2018-58, section 17. This option is only available if the relinquished property was transferred (or the parked property was acquired by the EAT in a reverse exchange) on or before the Disaster Date.
2. Extensions:Any 45 or 180-day deadline falling on or after the Disaster Date is extended to (1) the date set forth in the Notice, or (2) 120 days from the original deadline, whichever is later.[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.] Additionally, any 45-day identification period that falls prior to the Disaster Date is also extended if an identified replacement property is substantially damaged by the disaster.

If you believe you may be entitled to extensions under one of the above options, we strongly recommend that you speak with your tax professional for further guidance. Also, be aware that other counties/parishes may be added to the Covered Disaster Area and/or the extension date may be extended from time to time, even though the IRS does not issue a new notice, so you should check the IRS website for updates periodically.