Like-kind replacement properties should be clearly and specifically (unambiguously) identified to the Qualified Intermediary using the common property (street) address, and/or the legal description, and/or the Assessor's Parcel Number (APN). Generally, the more specific the identification the better; the more general or less specific the more risk that the 1031 Exchange could be disallowed during a Federal or state audit.
The 1031 proceeds of the sale must be re-invested in a like kind asset within 180 days of the sale. Restrictions are imposed on the number of properties which can be identified as potential Replacement Properties. More than one potential replacement property can be identified as long as you satisfy one of these ALTERNATIVE rules:
- The Three-Property Rule - Up to three properties regardless of their market values. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the value requirement.
- The 200% Rule - Any number of 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. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the value requirement.
- The 95% Exception - 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 identified. In other words, 95% (or all) of the properties identified must be purchased or the entire exchange is invalid.
NOTE: The replacement property received must be substantially the same as property identified within the 45-day limit described above.
Minnesota 1031 Exchange Intermediaries
At Commercial Partners Title Company, our experienced qualified intermediaries have over two decades of experience facilitating exchanges of real estate for clients throughout Minnesota and across the country. We can help you through all the phases of your exchange – from the sale of your relinquished property to the purchase of your replacement property. Our intermediaries can advise you, answer all of your questions, and prepare your necessary 1031 exchange documents so you don’t have to worry about a thing. Contact us today at our downtown Minneapolis office and set up a time to chat with one of our Minnesota qualified intermediaries about your exchange.
- 1031 Hotline: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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