Updated for 2025: here’s how taxpayers in Los Angeles and other disaster areas may be eligible for postponement of 1031 deadlines.
1031 exchanges enable taxpayers to defer taxes on the sale of business or investment real estate. If you want to sell a business or investment property, you can potentially deter capital gains taxes, depreciation recapture, and other taxes by purchasing a “like-kind” replacement property within a certain time frame. Section 1031 can help taxpayers build wealth for retirement or grow small businesses, but there are a lot of strict rules that must be followed in order to qualify.
The timeline for a forward exchange is typically inflexible. Once you sell your relinquished property, the clock starts ticking. You must identify your potential replacement properties within 45 days and the exchange must be completed by midnight on the 180th calendar day after the date of sale. The procedure for a reverse exchange is different, but the 45-day and 180-day deadlines remain the same.
When is the 1031 exchange timeline shorter than 180 days?
This window can be shortened if your tax filing date comes before Day 180. In this case, your exchange must be completed by the date your tax return is due. You can file for an extension to maximize your replacement period, but this will only extend the 1031 deadline to Day 180 — no further.
When can the 1031 exchange deadline be extended past 180 days?
Rev. Proc. 2018-58 allows for the postponement of certain “time-sensitive acts” (including 1031) for “individuals serving in the Armed Forces of the United States or serving in support of such Armed Forces in a combat zone or serving with respect to a contingency operation,” as well as “taxpayers affected by a federally declared disaster or a terroristic or military action.”
The IRS release goes into further detail about the specific requirements for qualification under this revenue procedure, but the section of interest for many taxpayers is the one relating to federally-declared disaster areas:
If an IRS News Release or other guidance is issued with respect to a specific federally declared disaster and authorizes postponement of acts in this revenue procedure, affected taxpayers may use the postponement rules.
In 2025, this is relevant for residents or those who own businesses in Los Angeles County, as these taxpayers qualify for tax relief. Those with tax payment and filing deadlines that fall “on or after Jan. 7, 2025, and before Oct. 15, 2025, are granted additional time to file.” This is true both for individuals and for many types of corporate entities, which will have until October 15th to file or complete certain time-sensitive actions.
This can include 1031 exchanges. The relinquished or replacement properties do not need to be located in the disaster area, so long as the primary address of the taxpayer executing the exchange falls within the affected area.
If the taxpayer’s address is in the affected area (in this case Los Angeles County), the exchange can qualify for General Postponement under Section 6 of Rev. Proc. 2018-58. If the 45-day or 180-day deadline falls after January 7th, 2025, the exchanger will have until October 15th, 2025 to complete the required actions. Even if the exchange was started after January 7th, 2025, it can still qualify for General Postponement.
If the taxpayer does not reside within the area, but the relinquished or replacement properties are in the affected area, then the exchanger can qualify for relief under Section 17 of Rev. Proc. 2018-58. This applies to any forward exchange where the relinquished property was sold prior to January 7th, 2025, or a reverse exchange where replacement property ownership was transferred to the EAT prior to January 7th, 2025.
Any 45-day or 180-day deadlines that fall after January 7th, 2025, are “postponed by 120 days or to the last day of the general disaster extension period authorized by an IRS News Release,” whichever is later. In this case, the “last day of the general disaster extension period” is October 15th, 2025.
If you quality under both sections – that is, if your business address and one or more of your exchange properties are in Los Angeles County – then you can choose which of these sections you want to employ to receive the necessary postponement to complete your exchange.
There are other reasons an exchange may qualify that are listed in the Revenue Procedure. Other disaster areas may also fall under this rule in 2025, and the list is updated frequently to include affected areas. You can look for news about your area on the IRS website.
If you want to know whether you qualify and how long you may have to complete your exchange, consult with your tax and legal experts, as there are many specifics to the revenue procedure and your individual situation may or may not qualify. JTC is ready to work with our clients to adjust to any changes that may arise in the course of an exchange.
To learn more about Section 1031 and the benefits of working with JTC, read our 1031 Exchange Guide.
