Estate and Succession Planning
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Published: February 28, 2025
In 2024, Florida and other parts of the Southeast were impacted by numerous hurricanes, notably Hurricanes Helene and Milton. In response to these storms, the IRS has provided eligible taxpayers with certain relief and deadline extensions. IRS Announcement IR-2024-266 Fl-2024-10 issued on October 11, 2024, regarding Hurricanes Milton and Helene, provides extension of certain deadlines to affected taxpayers with the right to use the postponement rules of Revenue Procedure 2018-58, regarding 1031 transactions to extend certain deadlines.
An Affected Taxpayer includes any individual whose principal residence or business is located in a covered disaster area. A covered disaster area is defined by the FEMA designated counties which varies from the two hurricanes. The designated counties under the Hurricane Helene disaster designation, which begins on September 23, 2024, include:
Alachua
Baker
Bradford Charlotte
Citrus
Collier
Columbia
DeSoto
Dixie
Duval
Franklin Gilchrist
Gulf
Hamilton
Hernando
Hillsborough
Jefferson
Lafayette
Lee
Leon
Levy
Madison
Manatee
Pasco
Pinellas
Putnam
Sarasota
Suwannee
Taylor
Union
Wakulla
The Hurricane Milton disaster designation, which begins on October 5, 2024, includes all Florida counties.
The IRS Announcement provides for a disaster extension period of May 1, 2025 for all returns and payments for affected taxpayers. How this applies to a 1031 exchange depends on the facts of a particular exchange, and whether the effected taxpayer is permitted to us the relief allowed under Section 6 or Section 17 of Revenue Procedure 2018-58 for certain Affected Taxpayers.
Section 6
Section 6 perm its Affected Taxpayers w ho begin a 1031 exchange AFTER the disaster date but before the end of the extension period (or in the case of these disasters, prior to December 31, 2024) to extend any deadlines that fall prior to the end of the extension period to the last day of the extension period. Based on the facts of a particular exchange this m ay perm it the extension of both the 45-day identification period and the 180-day exchange period. Note also that exchanges that m ay have only qualified for Section 6 treatment after Hurricane Helene m ay qualify for the Section 17 treatment described below following Hurricane Milton.
Section 17
Section 17 allow s Affected Taxpayers to extend the 45-day identification period and 180-day exchange period if the relinquished property w as transferred on or before the federally declared disaster. Each date is extended for 120-days or the general disaster extension period, i.e. May 1, 2025 (whichever is later). How ever, the postponement period can’t extend beyond the due date for the taxpayer’s return for the year of the transfer (including extensions) or one year. Because of this requirement it is vital that taxpayers w ho are considering taking advantage of these deadline extensions extend the filing of their returns as necessary. See below example describing the extension, assuming an original closing date of October 5, 2024, the designated disaster date for Hurricane Milton:
Assuming an original closing date of October 5, 2024 , the identification period would not be the later of March 19, 2025 (the original deadline of November 19, 2024, plus 120-days) or May 1, 2025, so May 1, 2025 would be the last day of the identification period; and the exchange period would be the later of August 1, 2025 (the original exchange deadline of April 3, 2025, plus 120-days) or May 1, 2025, so August 1, 2025 would be the last day of the exchange period.
These extensions would assume the taxpayers return for 2024 is not filed before those dates, meaning the taxpayer would want to put their return on extension if hey wish to sue the May 1, 2025 date for the ID period and/or the August 1, 2025 date for the replacement period.
Under certain circumstances a Non-Affected Taxpayer m ay also be permitted to take advantage of the Section 17 extension, though there are no circumstances that would perm it them to take advantage of Section 6. To qualify under Section 17, the Non-Affected Taxpayer must have commenced their exchange on or before the disaster date, and additionally must have difficulty meeting their original deadlines due to one or m ore of the following reasons:
- The Relinquished Property or the Replacement Property is located in the disaster zone;
- The principal place of business of any party to the transaction is located in the disaster zone;
- A party to the transaction is killed, injured, or missing due to the disaster;
- Necessary document relevant to the exchange or relevant land record is destroyed, damaged or lost due to the disaster;
- Lender won’t fund because of the disaster; or
- Title insurance policy cannot be issued due to the disaster.
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The ability of any taxpayer to take advantage of these extensions is highly dependent on the facts of their individual exchange, and those facts will determine to what extent that they will be able to take advantage of these extensions. Anyone interested in learning more about their individual ability to extend their 1031 transactions should consult with a tax professional.
