There are many rules and regulations that govern 1031 exchanges of real estate. In this article, we are going to discuss the rules for identifying 1031 exchange replacement property.
How to Identify Your 1031 Replacement Property
In a 1031 exchange, you must re-invest the sales proceeds from your relinquished property into a like-kind replacement property. There are certain restrictions surrounding the number of replacement properties that you can identify. Oftentimes, a taxpayer only wants to identify a single replacement property. But if you want to identify multiple properties, you must satisfy one of the following rules:
The 3-Property Rule – You can identify up to three replacement properties regardless of their market values.
The 200% Rule – You can identify any number of replacement properties as long as the aggregate fair market value of all replacement properties does not exceed 200% of the aggregate Fair Market Value (FMV) of all of the relinquished properties as of the initial transfer date.
The 95% Exception – You can identify any number of replacement properties if the fair market value of the properties actually received by the end of the exchange period is at least 95% of the aggregate FMV of all the potential replacement properties identifiedNOTE: The replacement property received must be substantially the same as property identified within the 45-day limit described above.
Contact a Qualified Intermediary
Contact a qualified intermediary to learn more about section 1031 of the Internal Revenue Code and how it can help you save taxes when selling real estate. The qualified intermediaries at CPEC1031 have over twenty years of experience facilitating 1031 exchanges in Minnesota and across the country! We have all the tools necessary to walk you through your 1031 exchange and ensure you feel comfortable every step of the way. Contact us at our Minneapolis office today to get your exchange started!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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