When you’re doing a 1031 exchange, you need to identify your replacement property within the first 45 days after the date of the relinquished property closing. Most people use the simplest rule (the 3 property rule). However, if you’re going to be identifying a DST (Delaware Statutory Trust), you should be mindful that the trust may be a portfolio of multiple properties. By identifying it you may reach the 3 property rule because its components exceed 3 properties.
Some people use the open third slot on their identification form as an insurance policy – trying to identify property as a fallback just in case the first two options don’t work out. By sliding a DST into that slot, you could blow the 3 property rule if that newly added DST is comprised of multiple assets.
There’s an easy workaround for this. Instead of using the 3 property rule you could use the 200% rule. However, in that case, you need to make sure that the value of all your identified properties doesn’t exceed twice the value of what you sold.
Work with a 1031 Exchange Professional
You can avoid any potential pitfalls like the one described above by working with a 1031 exchange professional at CPEC1031, LLC. Our qualified intermediaries are here to help you with all your like-kind exchange issues. Let us help set your exchange up for success. Contact us today at our Minneapolis office to learn more about our services and get started with your next like-kind exchange of real estate.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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