Rules and Requirements
The rules governing IRC §1031 exchanges are complex and often times inflexible. A mistake can result in a significant tax bill. Our experienced 1031 advisors know how to navigate the complex rules to help you successful complete an IRC §1031 exchange.
Certain rules and requirements including, but not limited to:
45-Day Property Identification Deadline
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An exchanger has 45 days from the date of the sale of their relinquished property to identify potential replacement properties using one of three rules:
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Three property rule – can identify any three properties regardless of value.
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Two hundred percent rule – can identify four or more properties as long as the value does not exceed 200 percent of the property sold.
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95-percent exception rule – if the value exceeds 200 percent, and you identify more than three properties, then 95 percent of what is identified must be purchased.
180 Day Exchange Deadline
Within 180 calendar days following the closing of the relinquished property the taxpayer must acquire all the replacement properties necessary to complete their IRC §1031 exchange.
Like-Kind Property for purposes of IRC §1031:
For IRC §1031 purposes, real property is like kind to other real property, including both fee interests and leasehold interests with greater than 30 years of term remaining. You can trade almost any kind of real property for any other kind of real property, including:
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Business Owning Property
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Farms
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Shopping malls and strip mall centers
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Golf courses and practice ranges
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Trailer parks
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Self-storage facilities
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Oil, gas, and mineral interests
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Water and ditch rights
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Condominiums
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Improvements/Build to Suits
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Build on land already owned
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Convenience Store
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Land
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Commercial building, warehouse
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Gas stations
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Apartments
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Hotels and Motels
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Rental Properties
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Conservation easements
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Timberland
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Communication towers
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Parking lots
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Any other real property
Non-eligible Property Types
Real property must be held for productive use in a trade or business and excludes securities, partnership interests and LLC membership interests. The following are not qualifying types of property in IRC §1031 exchanges:
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Primary Residence
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Indebtedness
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Stocks, Bonds or Notes
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Partnership Interests or LLC membership interests
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Inventory
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A lease with a term greater than 30 years, which is like kind to a fee interest in real property
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A lease with a term less than 30 years, is like kind to a leasehold interest to another with a term less than 30 years