1031 Exchange Rules & Requirements
When and How to Properly Identify
The identification period in a delayed exchange begins on the date the Exchanger transfers the relinquished property and ends at midnight on the 45th calendar day thereafter. As soon as you have identified any suitable replacement properties, it is best to send in an identification – you can always change your identifications up to the 45th day deadline.
How do I actually identify? To qualify for a §1031 tax deferred exchange, the tax code requires identifying replacement property:
- In a written document signed by the Exchanger;
- Hand delivered, mailed, telecopied, or otherwise sent;
- Before the end of the identification period to your Qualified Intermediary
The replacement property must be unambiguously described (i.e. legal description, street address or distinguishable name). The type of property should be described in a personal property exchange.
Identification Methods
- 3 Property Rule: Three properties without regard to their fair market value (“3 Property Rule”);
- 200% Rule: Any number of properties so long as their aggregate fair market value does not exceed 200% of the aggregate fair market value of all relinquished properties (“200% Rule”);
- 95% Rule: Any number of properties without regard to the combined fair market value, as long as the properties acquired amount to at least ninety-five percent (95%) of the fair market value of all identified properties (“95% Rule”).
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