IRC 1031 Exchange Rules

IRC 1031 Exchange Rules

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

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

The Two Hundred Percent Rule dictates that if three or more rental properties are identified, the aggregate market value of all rental properties may not exceed 200% of the value of the rental property, which was sold.

The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement rental properties acquired represent at least 95% of the aggregate value of rental properties identified, the exchange will still qualify.

In their IRC 1031 exchange, many property owners benefit from buying IRC 1031 property as tenants in common because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.