| Three Property Rules |
|
THE THREE IDENTIFICATION RULES (only one would be used)
1. Three Property Rule - The Exchanger may identify up to three properties of any value. 2. 200% Rule - The Exchanger may identify more than three properties, but the total fair market value of what is identified cannot exceed 200% of the fair market value of the relinquished property. This is usually used in the following two situations: a. Seller is selling unencumbered land and buying replacement land for cash. b. Seller is selling a property leveraged at 65% or more and planning to acquire replacement property with similar leverage. 3. 95% Exception - If the Exchanger identifies properties in excess of both Rule 1 and Rule 2, then the Exchanger must acquire 95% of the equity of all properties identified. Implementation of this is useful when acquiring multiple houses/lots in a subdivision or when selling a greater priced property ($700,000) and acquiring during your 45 day identification period a series of inexpensive properties ($30,000 - $50,000) such as rental homes. |
Ready to Begin Your 1031 Exchange?
