If you’re in the middle of a 1031 exchange when disaster strikes, do you lose your tax-deferral benefits? Thankfully, not always.
The IRS provides relief through disaster-related deadline extensions, but only for those who meet strict qualifications. Let’s break down what you need to know to stay compliant and preserve your investment gains—even in a crisis.
📌 The Basics: 1031 Exchange Deadlines
In a standard 1031 exchange:
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You have 45 days from the sale of your relinquished property to identify replacement properties.
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You must close on one or more identified properties within 180 days—or by your tax return due date (including extensions), whichever comes first.
These timelines are rigid and unforgiving—unless a federally declared disaster changes the rules.
⚠️ Disaster Strikes: Now What?
Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act and IRS Revenue Procedure 2018-58, the IRS can grant automatic extensions of 1031 deadlines if a major disaster is declared by the President.
Per IRS rules, deadlines that fall on or after the disaster declaration date may be extended by 120 days or until the end of the IRS-announced general disaster extension period—whichever is later.
🛡️ Who Qualifies for Relief?
You’re a “Qualified Taxpayer” if:
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Your principal residence or business is in a declared disaster area
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You’re a relief worker in the disaster zone
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Your records are kept in the affected area
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Or, you’re directly impacted while visiting the region
For those not located in the disaster area but still affected, you must notify the IRS directly at 866-562-5227.
✅ What to Do If You Qualify
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Verify if your location qualifies via FEMA Disaster Declarations and check IRS Disaster Relief Notices.
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Consult your CPA or tax attorney to confirm eligibility and document your claim.
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Notify your Qualified Intermediary (QI) immediately so they can update your exchange file appropriately.
🚫 What Not to Assume
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Your QI cannot determine eligibility—this is your responsibility.
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Not all disasters qualify. There must be a formal declaration and specific IRS guidance for 1031 extension relief.
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Extensions are not automatic for those outside the listed areas—you must self-identify to the IRS.
Final Thought
Disaster relief extensions can be a crucial safeguard in uncertain times. But to benefit, you must act decisively, stay informed, and lean on expert guidance. Your tax-deferral strategy depends on it.
FAQ’s
1. How do I know if the IRS has granted an extension for my specific disaster area and exchange timeline?
You need to confirm two things:
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First, check if your county is part of a federally declared disaster area via FEMA’s disaster declarations list.
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Second, visit the IRS disaster relief page to see if specific guidance has been issued that includes 1031 exchange relief.
Only when both criteria are met—and your exchange deadlines fall within the relief window—can you claim the extension.
2. What happens if my 180-day exchange period was already extended once through a tax return extension—can I still get the disaster relief extension on top of that?
Yes, you can. These are two distinct extensions:
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Filing an IRS Form 4868 gives you more time to file your tax return, which can extend your 180-day exchange window.
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A disaster-related extension adds time to your 1031 deadlines independently—typically 120 days or more if your exchange deadlines fall within the disaster window.
You can leverage both, assuming you meet the qualifications for each.
3. If my Qualified Intermediary didn’t notify me about a disaster extension, can I still claim the relief retroactively?
Yes, but only if you take action. The IRS puts the responsibility on the taxpayer—not the QI—to determine eligibility.
If you believe you qualify, contact the IRS Disaster Relief Hotline at 866-562-5227 as soon as possible, and then inform your QI to update your exchange file accordingly.
Retroactive application may be allowed within the published relief window, but delay could jeopardize your exchange.