1031 Exchange Rules
1031 Exchange Rules
In order to comply with IRS IRS section 1031, investment property investors must identify potential replacement
commerical investment properties withing 45 days of the close of escrow and acquire said
commerical investment property (or
commerical investment properties withing 180 days of the closing of the relinquished commerical investment property. Furthermore, when entering into a 1031 exchange, investment property investors must comply with one of the following rules:
The Three-Commerical Investment Property Rule - Dictates that the seller must identify up to a total of three potential replacement commerical investment properties within the 180 day Acquisition Period.
The Two Hundred Percent Rule dictates that if three or more commerical investment properties are identified, the aggregate market value of all commerical investment properties may not exceed 200% of the value of the commerical investment property, which was sold.
The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement commerical investment properties acquired represent at least 95% of the aggregate value of commerical investment properties identified, the exchange will still qualify.
In their 1031 exchange, many investment property investors benefit from buying 1031 investment property as tenant in common because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.