The Internal Revenue Service (IRS) and the Franchise Tax Board (FTB) will be issuing guidance and notices shortly regarding income tax relief for victims of the Southern California wild fires affecting the San Diego, Orange, Los Angeles, Riverside and San Bernardino areas.

I will be posting any and all relief notices here to assist wild fire victims in obtaining badly needed relief and answers related to losses sustained during the Southern Califorina wild fire storms.

In addition, Exeter 1031 Exchange Services, LLC will be posting all income tax relief notices from the IRS and FTB for wild fire victims and wild fire storm related issues on its Exeter News Wire and is creating a web page (under construction) specifically for income tax relief information related to the Southern California wild fires.

The Internal Revenue Service (IRS) and the Franchise Tax Board (FTB) will be issuing guidance and notices shortly regarding income tax relief for victims of the Southern California wild fires affecting the San Diego, Orange, Los Angeles, Riverside and San Bernardino areas, which will most likely include an extension of the 45 and 180 calendar day 1031 exchange deadlines or due dates.  We will know more about any IRS and FTB extension of 1031 Exchange deadlines shortly. 

In the meantime, I thought I would point out that a natural disaster, also referred to as an act of God, such as the California wild fires is considered to be an involuntary conversion of your real property under Section 1033 of the Internal Revenue Code (1033 Exchanges with Involuntary Conversions) and as such allows you to structure a 1033 Exchange in order to defer the payment of your income tax liabilities. 

The insurance check that you will receive to reimburse you for your losses due to the California wild fires will be taxable in most cases.  You can elect to structure and complete a 1033 Exchange in order to defer the recognition and payment of your income tax liabilities by either rebuilding the property that was destroyed or by acquiring other replacement property that is like-kind to your property that was destroyed in the California wild fire storms. 

There are actually very few requirements in order to structure and complete a 1033 Exchange.  You must trade equal or up in value (i.e. build or buy something worth more), it must be like-kind to the property converted (i.e. apartment for apartment in a natural disaster situation), and must be acquired with in the 1033 Exchange deadlines (i.e. 2 years for a natural disaster). 

You can pull out cash (equity) and are not required to reinvest your equity like you are in a 1031 Exchange and you do not need a Qualified Intermediary (Accommodator) to hold your insurance proceeds duirng the 2 years like you do with a 1031 Exchange. 

Please feel free to contact us at (866) 393-8370 for more complete information.

 

Homeowners who are insured, lose their principal residence to the California wild fires, and receive insurance settlement proceeds can exclude from their taxable income up to $250,000 in capital gains per person ($500,000 for a married couple) pursuant to Section 121 of the Internal Revenue Code. The gain, if any, above the $250,000/$500,000 exclusion limitation can be reinvested in like-kind replacement property on a tax-deferred basis under Section 1033.

The insurance proceeds that you receive for your personal property contents is tax exempt.

Because a natural disaster such as the California wild fires is considered an unforeseen circumstance, disaster victims who lived in their primary residence less than the required two (2) years are able to take a partial, prorated tax-free exclusion under Section 121. 

President Bush stepped up federal engagement in the California wildfire emergency Wednesday, signing a major disaster declaration that funnels money to people whose property losses aren't covered by insurance.  You can read more on our web site at http://www.exeterco.com/income_tax_relief_for_victims_wild_fires.aspx.

The State Board of Equalization (BOE) has issued some tax relief for those affected by the Southern California wild fires.   

Most of these deal with extensions of time to file taxes, estimated tax payments, and other filings.  Also, there is some relief from penalties and interest but require a filing using BOE forms 468 for extension and 27 for relief of penalties and interest.  

Additionally copies of prior filed returns can be obtained free of charge by contacting the BOE.  

Information can be found at http://www.boe.ca.gov/news/pdf/64-Y-07.pdf 

County Property Tax Relief Announcements 

Los Angeles County Tax Assessor Rick Auerbach announced that real property owners will be able to defer and reduce real property taxes for those whose homes suffered damage in excess of $10,000.00.  Read more.

Orange County Tax Assessor has not issued any announcements at this point in time.

Riverside County Tax Assessor-Clerk-Recorder Larry Ward and Riverside County Treasurer-Tax Collector Paul McDonnell have teamed up to provide immediate real property tax relief for fire victims in response to the California fire disaster.  Read more.

San Bernardino County Tax Assessor Bill Postmus announced that real property tax relief will be available for victims of the devastating California wildfires that have ravaged residents of San Bernardino County.  Read more.

San Diego County Tax Assessor has not issued any announcements at this point in time, but has posted information and frequently asked questions regarding obtaining real property tax relief for victims of the California wildfires.  Read more.

Santa Barbara County Tax Assessor has not issued any announcements at this point in time.

Ventura County Tax Assessor has not issued any announcements, but has posted information regarding obtaining real property tax relief for the California wildfires.   Read more.

The Franchise Tax Board (FTB) today announced several relief measures for the victims of wildfires in seven Southern California Counties.  

The FTB will allow victims to receive additional tax refunds this year by immediately reporting their disaster losses through amended 2006 returns. In addition, the FTB has temporarily suspended mailing billing notices in the seven Southern California counties affected by wildfires.     

 

For the full article - see http://www.calcpa.org/Content/Files/Disaster%20Recovery/So%20Cal%20Oct%202007%20Fires.doc 

 

However, note that you have to be able to determine the loss amount currently which will take some time due to dealing with the insurance process.  Please consult with your tax professional to see if the benefit will be greater to claim on an amended 2006 return or on your 2007 return.

Internal Revenue Service (IRS)

There are no tax relief announcements from the IRS at this point in time.  However, we do anticipate numerous tax relief announcements from the IRS over the next couple of weeks for victims of the 2007 Southern California wildfire disaster, including the customary extension of the 1031 exchange deadlines: the 45 day identification and the 180 day 1031 exchange period.

For complete updated tax relief information for California wildfire victims, including the actual extension information for 1031 exchange due dates, you can visit http://www.exeterco.com/income_tax_relief_for_victims_wild_fires.aspx.

Because of the Presidents declaring the fire areas as eligible for assistance from FEMA  taxpayers in the following counties who sustained losses attributable to the disaster may deduct the losses on their 2006 federal income tax returns: Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura Counties.

Please consult with your CPA to determine if you will get a greater tax benefit by amending your 2006 return or by claiming the loss on your 2007 return.

The Internal Revenue Service is closely watching the situation in Southern California and will soon issue specific guidance for victims of the wildfires.

In the meantime, if you own property damaged by fire in the presidential disaster area, you have a choice: You may claim uninsured or unreimbursed disaster losses by filing an amended 2006 tax return or you may wait and claim any losses on your 2007 return.

You can visit http://www.exeterco.com/income_tax_relief_for_victims_wild_fires.aspx for more complete tax relief help information. 

October 29, 2007--SAN DIEGO--The Internal Revenue Service today announced tax relief for California taxpayers in the Presidential Disaster Area struck by severe wildfires beginning on Oct. 21, 2007. The disaster area consists of the following counties: Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura.

You can read the entire press release at http://www.exeterco.com/news_irs_issues_tax_relief_2007_california_fire_victims.aspx.

English, please?

The IRS has issued an extension Notice for Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura counties for the October 21st wildfires. [Note that the IRS may add additional counties later as FEMA adds counties. If you are near the affected area, you should check the disaster announcement website for updates. The FEA will not issue announcements if more counties are added.]

Both of the following criteria must be met to get the extension under Revenue Procedure 2007-56, section 17:

(1) The taxpayer is located in one of these counties or is otherwise an affected taxpayer as defined in the Notice, regardless of where the relinquished property or replacement property is located, or otherwise has difficulty meeting the exchange deadlines under the conditions in Revenue Procedure 2007-56, section 17; AND

(2) The relinquished property was transferred (or the parked property was acquired by the EAT in a reverse exchange under Revenue Procedure 2000-37) on or before October 21, 2007. IF the taxpayer meets these criteria, THEN any 45 day or 180 day deadline that falls within the period on or after October 21, 2007 through January 31, 2008, is extended for 120 days from such deadline. It is unclear from the guidance if 180 day deadlines falling after January 31, 2008 are also extended.

Please see Revenue Procedure 2007-56, Section 17, and the notice below for further details.

http://www.irs.gov/newsroom/article/0,,id=108362,00.html

This will help break it down for you.  The IRS has announced tax relief for victims of the California wildfire disaster that includes the extension of 1031 exchange deadlines or due dates if the deadline begins on or after October 21, 2007.  Your 45 calendar day identification period and your 180 calendar day 1031 exchange deadline will be extended to January 31, 2008 as long as your are located in one of the affected seven (7) Southern California counties.

We have just issued a new edition of The Exeter Exchange Newsletter with a concise overview of the tax relief assistance that is available to victims of the Southern California Wildfires.  You can access your PDF copy at http://www.exeterco.com/pdfs/The_Exeter_Exchange_Newsletter_Volume_One_Issue_2.pdf.