1031 Exchange Rules

1031 Exchange Rules

1031 Exchanges require an acquisition period of 180 days, during which the investment property investor must identify potential properties for the exchange (within 45 days) and acquire said investment property or investment properties. The acquisition period begins at the close of escrow on the relinquished investment property. Furthermore, all 1031 exchanges must adhere to one of the following rules:

The Three-Investment Property Rule states that the exchanger must identify up to, but no more than three potential investment properties during the acquisition period.

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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