Tax Free Exchange Rules
Tax Free Exchange Rules
1031 Identification Rules
Tax Free Exchange Rules require
property owners to identify like kind investment
properties for replacement within 45 days of the close of escrow on the relinquished investment property. Furthermore, all replacement investment
properties must be acquired within 180 days of close on the relinquished investment property. All
tax free exchanges must comply with one of the follow three rules:
The Three-Investment Property Rule - This rule allows the exchanger to identify up to, but no more than 3 potential investment properties as qualified replacement investment properties within the allotted time frame.
The Two Hundred Percent Rule dictates that if three or more investment properties are identified, the aggregate market value of all investment properties may not exceed 200% of the value of the investment property, which was sold.
The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement investment properties acquired represent at least 95% of the aggregate value of investment properties identified, the exchange will still qualify.
In their tax free exchange, many property owners benefit from buying property as TIC because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.