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1031 Exchange Rules


1031 Exchange Rules

1031 Exchange rules require a property owners to identify potential replacement investment properties within 45 days of the close of escrow and acquire the replacement investment property (or investment properties ) within 180 days of close of the relinquished investment property. Furthermore, when choosing a replacement 1031 exchange investment property for the 1031 exchange, the property owner must follow one of the following 1031 exchange rules:

  • The Three-Investment Property Rule - Any three investment properties regardless of their market values may be identified by the exchanger as potential replacement investment properties for the like kind exchange, however no more than 3 investment properties may qualify.

  • The 200% Rule - Stipulates that the aggregate value of all replacement investment properties in the exchange must not exceed 200% of the value of the relinquished investment property at the time of sale.

  • The 95% Exception - Finally, the 95% rule stipulates that the aggregate value of all like kind replacement investment properties must account for at least 95% of the value of the relinquished investment property at the time of sale in order for the exchange to qualify. This rule applies only if rules 1 and 2 are invalid.

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