Internal Revenue Code Section 1031
Rules & Regulations

SUMMARY OF EXCHANGE REGULATIONS

TIME DEADLINES:

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 exchange.


PROPERTY IDENTIFICATION:

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 disposed of.

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 identification period.


CONSTRUCTION:

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.


ACCOMMODATOR/FACILITATOR:

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.