1031 Exchanges ? What are the Rules?

Written by admin on May 10th, 2011


When it comes to 1031 exchanges there are many rules that must be followed in order to qualify for the huge tax deferral benefit. This benefit has so much to offer that it must be tightly regulated so it isn’t abused or misused. However, the tight regulations can be quite confusing for those who have never done this before or who only do it rarely. This is why there are so many resources to help you get through the process should you decide to pursue a 1031 tax exchange.


But, what are the rules for these exchanges?


The replacement property must be a “like” property. This is often misunderstood. We humans have a tendency to try and make things more difficult than they need to be. In this particular instance, there is plenty of room for the difficult stuff later on. Enjoy the ease of the fact this means a business property for a business property, an investment property for an investment property, and not an apartment for an apartment or something a little more restrictive. This allows you to be creative in your investing to a degree.

Timing. The replacement property must be identified within 45 days of the sale of the original property (often referred to in these transactions as the relinquished property), and the entire transaction must be complete within 180 days.

You may only identify three potential properties for the exchange.


While none of the rules seem earth shattering, there are small details that are best left to you and your CPA. If you are interested in growing your commercial property portfolio, this may very well be the best way for you to get the most bang for your buck. Consider your options for 1031 exchanges today and see what kind of possibilities this type of transaction opens up for you.

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