Internal Revenue Code Section 1031
Rules & Regulations
SUMMARY OF EXCHANGE REGULATIONS
Identify replacement property and notify Accommodator within 45 calendar days from disposition of old property
180 calendar days, beginning at same time as 45 day period, to complete entire
3-Property Rule: Up to three properties may be identified without regard to
their fair market values .
200% Rule: If more than three properties are identified, their combined fair
market values cannot exceed twice the fair market value of the property being
95% Rule: Permits identification of any number of properties if 95% of the
aggregate value of the named properties is acquired within the exchange period.
Identified properties may be changed, in writing, within the 45 day
New construction may qualify if properly identified. Any costs incurred after
the 180 exchange period will not count as reinvestment of exchange proceeds.
LIKE KIND PROPERTY:
IRC Section 1031 requires exchange of “like-kind” properties. This refers to the
nature, character or class of property. It does not require the exact same
grade, quality or use of the properties. Real property for real property is like
kind. Personal property may be exchanged within stricter guidelines.
An unrelated third-party facilitator or accommodator must be used to acquire the
exchanger's property and transfer replacement property to the exchanger. IRS
regulations allow direct deeding of the replacement property to the exchanger.
REVERSE EXCHANGES - See this FAQ
M Caution: There are many more nuances and twists
to tax deferred exchanges than can be presented here. Before beginning any real
estate transaction, you should consult with a qualified tax professional. All
aspects of your unique tax situation need to be evaluated. There are times when
a tax deferred exchange is not the best approach.