Federally Declare Disaster Declared Relief May Provide More Time to complete Your client’s Like Kind Exchange, “LKE”
On April 29, 2021 the IRS announced (AL-2021-01) the counties of Bibb, Calhoun, Clay, Hale, Jefferson, Perry, Randolph and Shelby are in a federally declare disaster area (due to the tornado and or straight winds). Most of you know by now the April 29, 2021 announcement extended the filing or certain tax returns including any required tax payments until August 2, 2021 (see the announcement for the details). What you may not know is the declaration also “postpones” certain time sensitive actions by our clients including the LKE.
The LKE safe harbor provides for two time sensitive client actions required to be covered by the safe harbor. The first is that the taxpayer must provide the qualified intermediary with a listing of replacement property to complete the exchange. The second time sensitive action is the LKE must be complete within 180 days of the disposition of the relinquished property. If your client entered into a LKE in which the relinquished property was either sold (QI) or transferred (EAT) on or before April 29, 2021 your client may have more time to complete either or the required actions.
The client’s LKE that qualify for a postponement may have up to an additional 120 days from the expiration of either the 45 day or the 180-day requirement. To qualify the expiration period must have expired between March 25, 2021 and August 2, 2021. The postponement is greater of 120 or August 2, 2021 for the 45 day or 180-day requirement. I refer you to Revenue Procedure 2018-58 for the details.
This has helped two of our clients having trouble meeting the 45-day required submission of their proposed replacement property. One other note if your client needs to postpone their 45-day period I believe that any replacement property closed on or before the expiration of the postpone period should be deemed to have met the 45 day rule under safe harbor.