1031 Exchanges: 200% Rule vs. 95% Rule

 1031 Exchange Property Rules

There are many ways you can go about doing a 1031 exchange, as well as many rules that govern the exchange of property under section 1031. In this article, we are going to discuss two of the most common options for exchanging property under section 1031 – the 200% exchange rule and the 95% exchange rule.

200% Rule

When using the 200% rule, you (as the exchangor) are allowed to identify as many replacement properties as you wish. But the total value of all replacement properties cannot exceed 200% of the relinquished property’s value.

95% Rule

The 95% rule is much less common than the 200% rule for exchanging 1031 property. If you’re using the 95% rule to defer gains, you are allowed to identify any amount of replacement properties so long as you receive at least 95% of the value of all your identified properties.

Choosing The Best Option

So what’s the best option for your 1031 exchange? That depends entirely on your situation. Every 1031 exchange is unique and should be treated as such. Are you exchanging real property or personal property? What types of replacement properties are you looking to exchange into? These are all questions that need to be carefully considered before deciding on a course of action.

Minnesota 1031 Exchange Company

At Commercial Partners Exchange Company, our qualified intermediaries have decades of experience aiding taxpayers with their like-kind exchanges. Whether you’re exchanging real estate or personal property, we can walk you through the process, prepare all the required documents, and answer all of your questions. Contact us today to speak with a Minnesota qualified intermediary about your exchange.

  • 1031 Hotline: If you have questions about the 200% or 95% rules, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved