Disaster Relief Extensions for Exchange Deadlines
In early 2004, the IRS issued Revenue Procedure 2004-13 that provided for the extension of certain tax deadlines, including tax deferred exchange deadlines, in those regions that were declared disaster areas by the President, but only upon the issuance of a “news release” for such disasters from the IRS. Rev. Proc. 2004-13 was then clarified by the IRS in Notice 2005-3 (issued January 13, 2005), to provide additional guidance for the application of disaster extensions to exchanges. Notice 2005-3 is applicable to acts that may be performed on or after January 26, 2005. The rules of Notice 2005-3 are highly technical and anyone seeking to utilize it should obtain the counsel of their tax or legal advisor. In general, Notice 2005-3 provides:
  • The 45-day Identification Period and the 180-day Exchange Period for delayed exchanges and the times deadlines for safe harbor parking transactions specified in Rev. Proc. 2000-37 are “time sensitive acts” eligible for extension.
  • A 120-day postponement (or the ending date announced in the Presidential disaster declaration if later) is allowed if the Exchanger has difficulty meeting the deadlines for any of these “time sensitive acts”, but only if (a) the relinquished property was transferred to a buyer, or the qualified indicia of ownership was transferred to the Exchange Accommodation Titleholder, on or before the disaster declaration date and (b) the Exchanger is either an “affected taxpayer” or has “difficulty meeting the time deadlines due to the disaster”. “Affected Taxpayers” include relief workers and individuals and businesses who are located in the disaster area, or whose tax records are located in the disaster area. Reasons the taxpayer may have “difficulty meeting the time deadlines due to the disaster” include (a) the relinquished or replacement property or the principal place of business of one of the parties involved in the exchange is located in the disaster area (this includes the QI, EAT, settlement agent/attorney, lender, title insurer), (b) any party to the transaction is killed, injured or missing, (c) a land record document or a document prepared in connection with the exchange is destroyed, damaged or lost, and (d) title insurance, loans, or flood, hazard or other such insurance is unavailable for property located in the disaster area.
  • A 120-day postponement is allowed for the 180-day Exchange Deadline if, after the end of the 45-day Identification Period, the identified replacement property in a delayed exchange, or the identified relinquished property in a safe harbor parking transaction is “substantially damaged”.