1031 Tax Exchange Rules
1031 Tax Exchange Rules
1031 Tax Exchange rules require an investors to identify potential replacement
investment properties within 45 days of the close of escrow and acquire the replacement
investment property (or
investment properties ) within 180 days of close of the relinquished investment property. Furthermore, when choosing a replacement
1031 tax exchange investment property for the 1031 tax exchange, the
investor must follow one of the following
1031 tax exchange rules:
The Three-Investment Property Rule - Any three investment properties regardless of their market values may be identified by the exchanger as potential replacement investment properties for the like kind exchange, however no more than 3 investment properties may qualify.
The Two Hundred Percent Rule - This rule dictates that, if three or more replacement investment properties are chosen, their total aggregate value may not exceed 200% of the value of the acquired investment property at its time of selling.
The Ninety-five Percent Exception - Finally, in the event that rules 1 and 2 are null and void, rule 3 takes precedence. This rule states that, if three or more replacement investment properties are used in the transaction, their total market value must comprise at least 95% of the value of the investment property being relinquished.
It is worthy to note that many 1031 tax exchange investors are drawn to tenants in common exchanges due to the pre-approved financing options available.