Dear Clients,

This notice is regarding the anticipated extensions to the 45-day identification period and 180-day exchange period as a result of the Coronavirus pandemic. Unfortunately, as of today, April 3, 2020, there have been no such extensions. Many individuals and real estate interest groups continue to exert great effort to get the IRS to issue the extensions.

I have had the pleasure to speak with many clients over the past weeks regarding a number of issues, including possible extensions resulting from the pandemic. The purpose of this notice is to provide you with more detail regarding the applicable law governing extensions, and the extension process itself, so you may be better informed. The below information is provided by attorney Lou Weller, with permission.

In these difficult and uncertain times, I thank you for your business. API and its associates will continue to make sure that your exchange is executed safely and smoothly, as we’ve done for 30 years. I will continue to provide you with updated notices as the situation progresses.

IRS RULES REGARDING 1031 TIME EXTENSIONS IN DISASTER SITUATIONS (at 4/3/2020)

IRS Revenue Procedure 2018-58 permits extension of IRC §1031 exchange deadlines upon issuance of an IRS Notice or other guidance permitting relief to taxpayers due to Federally declared disasters. However, the President declared a “National Emergency,” not a “disaster.” At present, it is unknown whether IRS will equate “emergency” with “disaster” for purposes of Rev Proc 2018-58. Extensions are not available until the IRS publishes its Notice granting relief.

If IRS chooses to act, for “affected taxpayers,” the deadlines for the 45-day Identification Period and the 180-day Exchange Period presumably will be extended by the later of 120 days or the due date listed in the IRS Notice. However, in no event may a postponement period extend beyond: (a) the due date (including extensions) of the taxpayer’s tax return for the year of the transfer; or (b) one year. Affected taxpayers will be defined in the IRS Notice, but generally they include parties: 1) whose primary residence or principal place of business is located within the disaster zone, or 2) who will have difficulty meeting the 45-day and / or 180-day IRC 1031 deadlines for either or both deferred and safe-harbor reverse exchanges because of any 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
• A necessary document relevant to the exchange or relevant land record is destroyed, damaged or lost due to the disaster
• A lender won’t fund because of the disaster
• A title insurance policy cannot be issued due to the disaster.

To be eligible for relief, the taxpayer must have sold the Relinquished Property on or before the date of the Federally declared disaster, or in the case of a reverse exchange, the Exchange Accommodation Titleholder (EAT) must have taken title to either the Relinquished or Replacement Property on or before the date of the Federally declared disaster. Only the deadlines that fall on or after the date of the Federally declared disaster will be extended.

The IRS publishes Disaster Relief Notices on its website at www.irs.gov/uac/Tax-Relief-in-Disaster-Situations. It frequently updates these notices in the weeks following the disaster to add counties to the disaster zone. Exchangers who wish to take advantage of these deadline extensions should check the IRS website frequently to determine if disaster relief is available.

Disaster relief is optional and, as mentioned, it is unclear whether IRS will treat a National Emergency in the same manner as a Federally declared disaster. If this does occur, taxpayers that are “affected taxpayers” must advise their Qualified Intermediary that they are eligible for disaster relief, and that their exchange deadline(s) are extended, otherwise the original 45-day and 180-day deadlines will control because they are incorporated in the applicable exchange or qualified exchange accommodation agreements.