IRS Extends 1031 Exchange Deadlines for Los Angeles Wildfire Victims

The IRS has announced important relief measures for individuals and businesses impacted by the California wildfires and straight-line winds that began on January 7, 2025. Among the relief provisions is an extension for taxpayers involved in 1031 exchanges, offering additional time to meet critical deadlines. Here’s what you need to know:

Key Details

• Disaster Date: January 7, 2025
• Extension Date: October 15, 2025
• Covered Disaster Area: Los Angeles County, California

Who Qualifies?

The relief applies to Affected Taxpayers, including individuals living or businesses operating in Los Angeles County. The location of the relinquished or replacement property doesn’t matter—eligibility is based on the taxpayer’s principal residence or business location in the disaster area.

Two Relief Options for 1031 Exchanges

Option 1: General Postponement

• Who Qualifies: Only Affected Taxpayers.
• Extensions:
  • Any 45-day or 180-day deadline that falls between the Disaster Date (January 7, 2025) and October 15, 2025, is extended to October 15, 2025.
  • Deadlines occurring after October 15, 2025, remain unaffected.

Option 2: Alternative Extension

• Who Qualifies:
  • Affected Taxpayers.
  • Taxpayers experiencing difficulty meeting the 45-day or 180-day deadlines due to the disaster, as outlined in IRS Revenue Procedure 2018-58.
  • Note: The relinquished property must have been transferred (or parked in a reverse exchange) on or before the Disaster Date.
• Extensions:
  • Deadlines are extended to the later of:
    1. October 15, 2025, or
    2. 120 days from the original deadline.
  • Extensions are capped at one year or the tax return due date (including extensions) for the year the relinquished property was disposed of.
  • If the 45-day identification period ends before the Disaster Date and the identified replacement property is damaged, additional extensions may apply.

What Should You Do?

If you believe you qualify for these extensions, consult your tax professional to ensure compliance and proper filing. Keep in mind:

• Additional counties may be added to the Covered Disaster Area, and the extension date may be updated.
• Periodically check the IRS website for the latest updates to ensure you don’t miss any critical changes.

This extension could make a significant difference for those navigating the complexities of 1031 exchanges while dealing with the aftermath of the disaster. Reach out to your tax advisor to determine your next steps and take full advantage of these relief measures. Let us know if you need to be connected with an experienced 1031 specialist.