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1031 Tax Exchange Rules

1031 Tax Exchange rules require an investment property 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 investment property 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 200% Rule - States that, in the event that three or more replacement investment properties are used, their total market value must not exceed 200% of the value of the investment property that is being relinquished.

  • The 95% Exception - Finally, in the case that rules 1 and 2 do not apply, the aggregate value of the like kind investment properties must account for at least 95% of the value of the investment property being sold in order for the exchange to qualify.

    Contact us for more questions regarding 1031 tax exchanges and TIC exchanges and we will put you in contact with a specialist in your area.