IR-2005-84 (08/30/05)
IR-2005-91 (09/02/05)

Acting promptly in response to the massive damage caused by Hurricane Katrina, the IRS announced that victims were eligible for special tax relief. Portions of Louisiana (31 parishes), Mississippi (15 counties), and Alabama (3 counties) were covered by Press Release IR-2005-84. Press Release IR-2005-91 added additional areas in Louisiana, Mississippi, Alabama, and Florida. In the past, further areas have been added as information becomes available and the extent of damage from the disaster is quantified.

The disaster areas designated under Press Release Nos. IR-2005-84 and IR-2005-91 for individual relief include:

• 64 Louisiana parishes: Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Caldwell, Calcasieu, Cameron, Catahoula, Claiborne, Concordia, Desoto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, Lafayette, Lafourche, LaSalle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Pointe Coupee, Plaquemines, Rapides, Red River, Richland, Sabine, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Landry, St. Mary, St. Martin, St. Tammany, Tangipahoa, Tensas, Terrebonne, Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana and Winn;
• 52 Mississippi counties: Adams, Amite, Attala, Chickasaw, Choctaw, Claiborne, Clarke, Clay, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Itawamba, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lee, Lincoln, Lowndes, Madison, Marion, Monroe, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Webster, Wilkinson, and Winston;
• Six Alabama counties: Baldwin, Clarke, Choctaw, Mobile, Sumter and Washington; and
• Three Florida counties: Broward, Miami-Dade and Monroe.

As a result of these Press Releases, taxpayers involved in tax-deferred exchanges and reverse transactions may be eligible for an extension of their "time sensitive deadlines" under Notice 2005-3. Press Release IR-2005-84 fixes October 31, 2005, as the extension deadline; however, Notice 2005-3 provides for a minimum of 120 days for IRC §1031 transaction related extensions under its General Rule extension.

"Time sensitive acts" include (1) the 45 day identification deadline and the 180 day exchange deadline for delayed exchanges and (2) the deadlines set forth in Rev. Proc. 2000-37 for safe harbor reverse exchanges (i.e., the initial 5 day deadline to enter into a QEAA, the 45 day identification deadline, the 180 day exchange deadline, and the 180 day combination time deadline associated with a combined reverse/delayed exchange).

A taxpayer qualifies for the General Rule extension if (1) the relinquished property was transferred on or before the disaster declaration or if the qualified indicia of ownership has been transferred to the exchange accommodation titleholder on or before that date; and (2) the taxpayer is an "affected taxpayer" or has difficulty meeting the time deadlines due to the disaster.

"Affected taxpayers" include individuals and businesses located in the disaster area, those whose tax records are located in the disaster area, and relief workers.

Reasons for having "difficulty meeting the time deadlines due to the disaster" include:

1. The relinquished or replacement property is in the disaster area;
2. The principal place of business of one of the parties involved in the exchange is located in the disaster area, specifically mentioned as parties are the QI, EAT, transferee, settlement attorney/agent, lender/financial institution, and title insurer;
3. Any party to the transaction (or an employee involved in the transaction) is killed, injured, or missing as a result of the disaster;
4. A document prepared in connection with the exchange (i.e., Exchange Agreement or an assignment or deed) or a relevant land record (i.e., documents at the Recorder's Office?) is destroyed, damaged, or lost as a result of the disaster;
5. A lender decides to permanently or temporarily suspend funding of loans for real estate closings due to the disaster or due to the unavailability of flood, disaster, or other hazard insurance due to the disaster;
6. A title insurer is unable to provide a required title insurance policy at closing due to the disaster; and
7. 7. Any similar reason. Additionally, Notice 2005-3 permits a 120 day postponement, for delayed exchanges, of the 180 day exchange deadline if, after the end of the 45 day identification period, the identified replacement property is "substantially damaged" or, in the case of a safe harbor reverse exchange, the identified relinquished property is substantially damaged. Specific information regarding this Press Release can be obtained from the IRS' webpage at www.irs.gov.

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All information contained herein is provided as a matter of courtesy to our clients. First American Exchange Company, its officers and agents make no representations as to the completeness and applicability of the information contained herein to each individual taxpayer. As a Qualified Intermediary, First American Exchange Company is precluded from providing tax or legal advice to its clients. Please consult your own independent tax or legal advisor regarding your specific circumstances.