Exchange Requirements

To complete a successful 1031 exchange, remember these key guidelines:

1. Property must be held for investment or used for productive trade or business use.

2. Identification Rules. When your escrow closes on your relinquished property, you have 45 days to identify your replacement property using either the: (See rules below)

3 Property Rule

Allows you to identify one, two or three properties of any value. You can acquire one or all of the identified properties.

200% Rule

Permits the identification of more than three properties. However the aggregate value of all properties identified cannot exceed 200% of the value of the property being relinquished. As with the three property rule, you can acquire one or all of the identified properties.

95% Exception

If you exceed both of the above rules, you can still have a valid 1031 exchange if you acquire 95% of the total value of all the properties identified

3. Closing Rules. You have 180 days to close on your replacement property.

4. Qualified Intermediary. You must use a QI who is a neutral party who has not advised you in the last 2 years. The QI will hold all monies until your exchange closes. Secure your QI before your relinquished property sale closes.

5. Reinvestment Requirements. To defer all taxes, buy equal or greater in value, reinvest all proceeds into the replacement property, and replace the value of debt (equal or greater) that was on the relinquished property.

6. Title Requirements. Use the same taxpayer ID in both the relinquished and replacement properties.If you meet these guidelines and are compliant with the 1031 regulations, your exchange should be completely tax deferred. Access our Knowledge Center for more information.