Friday, October 2, 2009

1031 Tax Update (IRS disaster relief)

From our friends at Atlanta Deferred Exchange, Inc. (ADE):

The following counties in Georgia qualify for IRS disaster relief following the recent floods: Bartow, Catoosa, DeKalb, Fulton, Gwinnett, Heard, Newton, Rockdale and Walker counties. If a taxpayer who is living in one of these counties is doing a tax deferred exchange with a relinquished sale that took place before September 18, 2009 and their 45-day identification period falls between September 18th and December 17th, they should be entitled to a 120-day extension. For example, if the taxpayer closed on their relinquished sale on September 12, 2009, their 45-day identification deadline would be October 27, 2009 (which is between September 18th and December 17th). Therefore, they would be entitled to a 120-day extension which falls on February 24, 2010. It is also our understanding that the taxpayer would then get their pre-requisite additional 135 days (45 days plus 135 days equals 180 days) to complete the transaction. Of course, they would have to file an extension because you get 180 days or the date your tax return is due, whichever comes first, and April 15th would have come sooner. But if they do file an extension, it is possible they would have up until July 9, 2010 to complete the exchange. If the taxpayer's 180-day deadline falls between September 18th and December 17th, they would also get a 120-day extension from their original 180-day deadline. What is somewhat unclear is if the 45-day identification period has ended before September 18th and the 180-day acquisition period falls after December 17th as to whether or not the taxpayer would get an extension of 120 days from their original 180-day deadline. To view a copy of the IRS Notice visit:,,id=213657,00.html

To view Revenue Procedure 2007-56 (see Section 17) which addresses time sensitive acts, visit strict interpretation of this guidance would lead one to believe that you would also get a 120- day extension in this circumstance. If the taxpayer's 180-day deadline falls between September 18th and December 17th and they have decided not to complete the exchange, it might be beneficial to consider taking the 120-day extension. Under this approach, the taxpayer would not receive their proceeds from the qualified intermediary until after the beginning of the new tax year and based on the installment sale reporting approach, the tax recognized on this disbursement would not have to be reported until the 2010 tax year - just something to consider. As always, our goal is to bring you accurate and timely information that will help you make better decisions.

All the best,Ron Raitz
For more information please contact Ron Raitz, President of ADE. Email:

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