What Are The Rules About Identifying Replacement Property In A 1031 Ex

For many investors, finding suitable replacement property is the biggest challenge in any 1031 exchange. While occasionally the perfect property will come along – sometimes even before the relinquished property is sold – this it not the case in most exchanges.

For investors who relinquish before finding a replacement property, there are several important requirements that must be followed with regard to identifying replacement property in order for the 1031 exchange to succeed in the eyes of the IRS.

These “Rules of Identification” include:

1. Up to three replacement properties may be identified without regard to their fair market value (The Three Property Rule)
2. Any number of properties so long as their aggregate fair market value does not exceed 200% of the aggregate fair market value of all relinquished properties (The 200 Rule)
3. Any number of replacement properties without regard to the combined fair market value, so long as the replacement properties finally acquired amount to at least 95% of the fair market value of all identified replacement properties (The 95% Rule)

These different options give the investor the flexibility needed to effectively exchange investment or business property.

To find out how we can help you find and close on your next 1031 exchange property or to learn more about the exchange process and our qualified intermediary services, please visit our website.