If you’re afraid to identify your 1031 exchange replacement property because you don’t want your money to be tied up indefinitely, can you identify more than one replacement property even if you’re only planning to buy one of them?
The answer is yes. This is called “identifying in the alternative.”
How Does Identifying in the Alternative Work?
You identify property A or property B, but not both. For example, you could identify an apartment complex or a rental house, but not both of them.
If you are unsure which property will work out, identifying in the alternative can give you a backup plan without breaking the rules.
What are the rules?
3 Property Rule
200% Rule
95% Rule
Remember – all identifications must still follow IRS limits under the tax code.
The flexibility offered by identifying in the alternative can keep your 1031 exchange funds from being tied up while you wait on a deal you might not want to close.
Consult with your qualified intermediary and your tax advisor before you finalize your property list because in a 1031 exchange, flexibility and compliance go hand in hand.
1031 Exchange Services in Minnesota
At CPEC1031, LLC we offer 1031 exchange services to taxpayers conducting like-kind exchanges of real estate throughout Minnesota and across the country. There are many guidelines you must abide by during your 1031 exchange in order to defer 100% of your capital gains tax burden. A qualified intermediary (like those at CPEC1031, LLC) can help ensure that you meet all of these requirements. Let our team of intermediaries work with you through the details of your next 1031 exchange of real estate. Contact us today at our Minneapolis office to get started.
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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