n-01-68.pdf

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# Part III - Administrative, Procedural, and Miscellaneous

Disaster Relief for Taxpayers Affected by the September 11, 2001 Terrorist Attack.

Notice 2001-68

## PURPOSE

This notice supplements the tax relief granted in Notice 2001-61, 2001-40 I.R.B.
305 (October 1, 2001), for taxpayers affected by the September 11, 2001 Terrorist
Attack (the "Terrorist Attack") by clarifying and expanding the definition of affected
taxpayer, listing additional acts for which a postponement is granted, and providing
other relief. The relief provided to taxpayers in this notice will apply retroactively to
September 11, 2001.

This notice also postpones the deadlines for certain acts performed by the
Internal Revenue Service (IRS). The postponement of these deadlines is not
retroactive to September 11, 2001. Thus, the IRS deadlines are postponed only if the
last day for performing the act (e.g., making a tax assessment) would otherwise be on
or after November 2, 2001.

Taxpayers who believe they are entitled to relief under this notice should mark
"September 11, 2001 Terrorist Attack" in red ink on the top of their returns and other
documents submitted to the IRS and petitions submitted to the United States Tax Court.
Taxpayers should not put this notation on envelopes. Doing so may result in a
delay in the delivery or processing of the return or document.

Taxpayers that do not qualify for relief under Notice 2001-61 or this notice may
still qualify for extensions and relief from penalties for reasonable cause. Reasonable
cause relief may also be available to taxpayers who did receive relief under Notice
2001-61 or this notice but who nevertheless could not meet their tax obligations within
the relief period. A request for relief from penalties for reasonable cause should be
attached to the return with an explanation of the reasons supporting relief. If penalties
are assessed, Form 843, Claim for Refund and Request for Abatement, may be
completed as a request for reasonable cause relief from penalties.

## A. MISSING TAXPAYERS

Individuals missing as a result of the Terrorist Attack are affected taxpayers as
defined in Notice 2001-61 under the term "victims of the crash." Thus, the relief
granted by Notice 2001-61 and this notice applies to individuals missing as a result of
the Terrorist Attack.

## B. POSTPONEMENT OF DEADLINES FOR SECTION 1031 EXCHANGES

As explained below, a 120-day postponement of time is granted to affected
taxpayers for the acts listed in Rev. Proc. 2001-53, 2001-47 I.R.B _ (November 19,
2001), if the last day to perform the act would otherwise fall within the period beginning
on September 11, 2001, and ending on November 30, 2001. One of the acts listed in
Rev. Proc. 2001-53 is an exchange of property under section 1031. This notice
provides three types of postponements relating to section 1031 exchanges.

(1) If the taxpayer (transferor) is an affected taxpayer under Notice 2001-61,
then the last day of the identification period or the exchange period set forth in section
1.1031(k) -1(b)(2) of the regulations, relating to deferred like-kind exchanges, or the last

day of any period set forth in section 4.02(3) through (6) of Rev. Proc. 2000-37, 2000-
40 I.R.B. 308 (October 2, 2000), relating to a qualified exchange accommodation
arrangement, is postponed by 120 days if the following requirements are met:

(a) The relinquished property was transferred on or before September 11, 2001,
or, in a transaction governed by Rev. Proc. 2000-37, property was transferred to the
exchange accommodation titleholder on or before September 11, 2001; and

(b) Absent application of this notice, the identification period or the exchange
period, or any time period set forth in section 4.02(3) through (6) of Rev. Proc. 2000-37,
would end on or after September 11, 2001, and on or before November 30, 2001.

(2) If a taxpayer (transferor) is not an affected taxpayer under Notice 2001-61,
then the last day of the identification period or the exchange period set forth in section
1.1031(k)-1(b)(2), or the last day of any period set forth in section 4.02(3) through (6) of
Rev. Proc. 2000-37, is postponed by 120 days if the following requirements are met:

(c) It is difficult to meet a deadline set forth in section 1.1031(k)-1(b), or a
deadline in section 4.02(3) through (6) of Rev. Proc. 2000-37, due to the Terrorist
Attack for the following or similar reasons:

(I) The relinquished property or the replacement property is or was located in a

covered disaster area (as defined in Notice 2001-61); or

(II) The principal place of business of any party to the transaction other than the
transferor (e.g., a qualified intermediary, exchange accommodation titleholder,
transferee, settlement attorney, lender, financial institution or a title insurance company)
is located in a covered disaster area (as defined in Notice 2001-61); or

(III) Any party to the transaction other than the transferor (or an employee of
such a party who is or was involved in the section 1031 transaction) was killed, injured,
or is missing as a result of the Terrorist Attack; or

(IV) A document prepared in connection with the exchange (e.g., the agreement
between the transferor and the qualified intermediary or the deed to the relinquished
property or replacement property) or land records were destroyed, damaged, or lost as
a result of the Terrorist Attack; or

(V) A lender decided not to fund a real estate closing due to the Terrorist Attack
or refused to fund a loan to the taxpayer because terrorism insurance was not
available; or

(VI) A title insurance company was not able to provide the required title
insurance policy necessary to settle or close a real estate transaction due to the
Terrorist Attack.

(3) If a postponement is not otherwise granted under paragraphs (1) and (2), a
postponement to September 24, 2001, similar to the postponement provided in Notice
2001-63, 2001-40 I.R.B. 308 (October 1, 2001), is granted if the following requirements
are met:

(a) The relinquished property was transferred on or before September 11, 2001,

or, in a transaction governed by Rev. Proc. 2000-37, property was transferred to the
exchange accommodation titleholder on or before September 11, 2001; and

(1) This notice expands the relief provided by paragraph (2) of the Grant of Relief
section of Notice 2001-61. The additional relief is for tax returns on an extension (not
on a postponement under section 7508A) that expires on or after December 1, 2001,
and on or before January 31, 2002. For these returns, the last date for filing the return
is postponed until February 15, 2002, under section 7508A. This additional relief is
available only to taxpayers that have difficulty in meeting their federal tax obligations
because their records, computers, or other essential supporting services were lost or
damaged, or essential personnel were injured or killed, or are missing as a result of the
Terrorist Attack.

(2) Under paragraph (4) of the Grant of Relief section of Notice 2001-61, the IRS
granted to all affected taxpayers a 120-day postponement of time to perform the acts
described in section 301.7508A-1(c)(1), if the last day to perform the act fell within the
period beginning on September 11, 2001, and ending on November 30, 2001. One of
these acts is the filing of any Tax Court petition. Under this notice, the relief provided
by paragraph (4) is expanded as follows. If the last date for filing any Tax Court petition
would otherwise be on or after December 1, 2001, and on or before December 31,
2001, the last date for filing the petition is postponed by 60 days under section 7508A.

(3) In addition to the acts specifically identified in section 301.7508A-1(c)(1), a
120-day postponement is granted for each act listed in Rev. Proc. 2001-53, for affected
taxpayers if the last day to perform the act would otherwise fall within the period

beginning on September 11, 2001, and ending on November 30, 2001. This
postponement does not, however, apply to the acts required by section 148(f)(3) and
section 1.148-3(g), section 1.148-5(c), section 148(f)(4)(C)(xvi) and section 1.148-
7(k)(1), or section 149(e). Postponements of these acts for issuers of tax exempt
bonds were provided in Announcement 2001-101, 2001-43 I.R.B. 374 (October 22,
2001). For purposes of tax-exempt bonds, the term "affected taxpayer" shall include
any affected issuer as described in Announcement 2001-101. This postponement also
does not apply to the deadline for Form 5500 and Form 5500-EZ filings. The
Department of Labor's Pension and Welfare Benefits Administration Press Release No.
01-36 (released September 14, 2001) grants relief extending the deadline for filing
Form 5500 and Form 5500-EZ.

D. PARTNERS, S CORPORATION SHAREHOLDERS, AND BENEFICIARIES OF
TRUSTS AND ESTATES

Partners, S corporation shareholders, and beneficiaries of trusts and estates use
the information reported to them on Schedule K-1 by their partnerships, corporations,
trusts, or estates to prepare their own income tax returns. If the income tax return of
the partnership, S corporation, trust or estate was postponed or extended under this
notice or Notice 2001-61, the partner, S corporation shareholder, or beneficiary of a
trust or estate may not receive the Schedule K-1 prior to the due date or extended due
date of the partner's, shareholder's, or beneficiary's income tax return. The income tax
return of the partner, shareholder, or beneficiary is not postponed or extended by
Notice 2001-61 or this notice solely because the entity (the partnership, S corporation,
trust, or estate) is an affected taxpayer.

Partners, shareholders, and beneficiaries of trusts and estates may request
extensions of time to file their income tax returns. See I.R.C. § 6081. If the Schedule
K-1 is not received by the extended due date, the partner, shareholder, or beneficiary
should prepare and file the income tax return on a timely basis by making a reasonable
estimate in good faith of items of income, gain, loss, deduction, and credit attributable
to the taxpayer's interest in the entity. Later, when the Schedule K-1 is received, the
taxpayer should prepare an amended return reflecting the items reported on the
Schedule K-1. If the taxpayer's original return underestimated items of income or gain,
or overstated items of deduction, loss, or credit, and a late payment penalty attributable
to these items is assessed, the taxpayer should request an abatement of the penalty for
reasonable cause. If the original return was prepared in good faith based on
reasonable estimates of the tax items attributable to the entity, the IRS will waive or
abate penalties for late payment.

E. RELIEF FROM PENALTY FOR FAILING TO FILE PARTNERSHIP RETURN BY
MAGNETIC MEDIA

Any partnership that is an affected taxpayer, as defined in Notice 2001-61 and
this notice, and that is required to file a partnership return by magnetic media
(electronically) under section 6011(e) will not be assessed a penalty under section 6721
for failing to file the partnership return electronically if the partnership elects to file a
paper return. This relief is for partnership returns that have an original due date or
extended due date (not a postponed due date under section 7508A) on or after
September 11, 2001, and on or before November 30, 2001. Taxpayers who qualify
should write "September 11, 2001 Terrorist Attack" in red ink on the top of their paper

Form 1065. The IRS will abate any penalty that is improperly assessed.

## F. ACTS PERFORMED BY THE GOVERNMENT

(1) If the last date otherwise prescribed by law for making a tax assessment is on
or after November 2, 2001, and the taxpayer received a 120-day postponement of time
to file a Tax Court petition under paragraph (4) of the Grant of Relief section of Notice
2001-61, then the last date otherwise prescribed by law for making an assessment is
correspondingly postponed by 120 days. This additional time for making an
assessment is needed for the following reason. Under section 6503, the period of
limitations on assessment is suspended when a statutory notice of deficiency is mailed.
The section 6503 suspension period (generally 150 days) includes the period
(generally 90 days) after the issuance of a statutory notice of deficiency during which
the taxpayer is permitted to file a Tax Court petition and the IRS is prohibited from
making an assessment. See I.R.C. §§ 6213(a) and 6213(c). Under Notice 2001-61,
affected taxpayers are entitled to an additional 120 days to file a Tax Court petition in
response to the notice of deficiency. In some cases, the period of limitations on
assessment could expire prior to the expiration of the expanded period during which an
affected taxpayer may file a Tax Court petition.

(2) Similar to paragraph (1), if the last date otherwise prescribed by law for
making a tax assessment is on or after November 2, 2001, and the taxpayer receives a
60-day postponement of time to file a Tax Court petition under paragraph (2) of the
Additional Grant of Relief section of this notice, the last date otherwise prescribed by
law for making a tax assessment is correspondingly postponed by 60 days.

(3) Documents maintained by the IRS (including the Office of Chief Counsel) in

New York City were destroyed or lost in the Terrorist Attack, or remain in buildings that
are inaccessible. The destruction or loss of these documents (or the IRS's lack of
access to them) will materially interfere with the IRS's ability to timely administer the
Internal Revenue Code with respect to certain taxpayers. The taxpayers to whom these
records relate are "affected taxpayers" for the limited purpose of this paragraph. In
these cases, a 120-day postponement is granted for the following government acts if
the last date for performance of the act is on or after November 2, 2001, and on or
before November 30, 2001: making an assessment of any tax; issuing a statutory
notice of deficiency; allowing a credit or refund of any tax; collecting by the Secretary,
by levy or otherwise, the amount of any liability in respect of any tax; bringing suit by the
United States, or any office on its behalf, in respect of any tax liability; returning
property under section 6343; and the discharge of an executor from personal liability for
a decedent's taxes under section 6905. The IRS will notify, as soon as practicable, any
affected taxpayers, as defined under this paragraph, of the government act or acts that
will be postponed.

## G. TAXPAYER INQUIRIES

If you wish to recommend that other acts qualify for postponement under this
notice, Notice 2001-61, or Rev. Proc. 2001-53, please write to the Office of Associate
Chief Counsel, Procedure and Administration (Administrative Provisions and Judicial
Practice Division), CC:PA:APJP:Br2, 1111 Constitution Avenue, NW, Washington, DC
20224, or send an e-mail message to Notice.Comments@irscounsel.treas.gov. Please
write "7508A List" on the envelope or in the subject matter area of the e-mail.
H. DRAFTING INFORMATION

This notice was drafted by the Office of Associate Chief Counsel, Procedure and
Administration (Administrative Provisions and Judicial Practice Division). For further
information regarding this notice you may call the toll-free disaster hotline at (866) 562-
5227 or (202) 622-4940 (not a toll-free call).

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