The most basic type of 1031 exchange involves one relinquished property that you dispose of and one replacement property that you acquire. But that doesn’t mean that you are restricted to just one replacement property. In this article, we are going to explain how to exchange into more than one replacement property when conducting a 1031 exchange.
Napkin Test
Remember, in your 1031 exchange you need to make sure that your replacement property is equal to or greater than your relinquished property in value, equity, and debt (this is known as the napkin test). With that in mind, sometimes you have to exchange into more than one property in order to meet these requirements.
3 Property & 200% Rules
When you’re considering exchanging into multiple replacement properties, there are a few restrictions you need to abide by. The two most popular guidelines are the three property rule and the 200% rule. With the three property rule you can exchange into up to three replacement properties. The 200% rule allows you to exchange into as many properties as you want so long as the total value does not exceed 200% of the value of your relinquished property.
Minneapolis 1031 Exchange Services
The qualified intermediaries at CPEC1031 bring to the table over two decades of experience facilitating exchanges under section 1031 of the Internal Revenue Code. Our intermediaries have the skills and expertise needed to guide you through each stage of your transaction – from the sale of your relinquished property to the purchase of your replacement property. Contact us today to learn more about how section 1031 works and whether or not you are a good candidate. Our office is located in downtown Minneapolis, but we work with taxpayers from across the state of Minnesota.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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