1031 Exchange Rules

1031 Exchange Rules

1031 Exchange rules require a real estate investors to identify potential replacement income real estate within 45 days of the close of escrow and acquire the replacement income real estate (or income real estate ) within 180 days of close of the relinquished income real estate. Furthermore, when choosing a replacement 1031 exchange income real estate for the 1031 exchange, the real estate investor must follow one of the following 1031 exchange rules:

The Three-Income Real Estate Rule - Any three income real estate regardless of their market values may be identified by the exchanger as potential replacement income real estate for the like kind exchange, however no more than 3 income real estate may qualify.

The 200% Rule - Stipulates that the aggregate value of all replacement income real estate in the exchange must not exceed 200% of the value of the relinquished income real estate at the time of sale.

The 95% Exception - Finally, the 95% rule stipulates that the aggregate value of all like kind replacement income real estate must account for at least 95% of the value of the relinquished income real estate 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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