The treasury regulations contain restrictions on the number of properties which can be identified as potential replacement properties. Multiple potential replacement properties can be identified as long as you satisfy one of these ALTERNATIVE rules:
The Three-Property Rule
Up to three properties regardless of their market values. All identified properties are not required to be purchased to satisfy the exchange.
The 200% Rule
Any number of properties as long as the aggregate fair market value of all replacement properties does not exceed 200% of the aggregate Fair Market Value (FMV) of all of the relinquished properties as of the initial transfer date. All identified properties are not required to be purchased to satisfy the exchange.
The 95% Exception
Any number of replacement properties if the fair market value of the properties actually received by the end of the exchange period is at least 95% of the aggregate FMV of all the potential replacement properties identified. In other words, 95% (or nearly all) of the properties identified must be purchased or the entire exchange is invalid.
A Note on the Replacement Property
The replacement property that you receive should be “substantially the same” as property that you identified within the 45-day Identification Period. If you do not buy substantially the same property, then your replacement property may not be considered like-kind for 1031 exchange purposes.
CPEC1031, LLC
If you’re considering a 1031 exchange for your property, you’ve come to the right place! The qualified intermediaries at CPEC1031, LLC have been facilitating 1031 exchanges of all kinds for over twenty years. Contact us today at our Minneapolis office to learn more.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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