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1031 Exchange Rules


1031 Exchange Rules

IRS internal revenue code stipulates that exchangers must identify potential replacement commercial properties withing 45 days of the close of escrow and acquire said commercial property (or commercial properties ) withing 180 days of the closing of the relinquished commercial property. Furthermore, property investors must comply with one of the following rules:

  • The Three-Commercial Property Rule - Seller must identify up to a total of three potential replacement commercial properties within the Acquisition Period.

  • The 200% Rule - States that, in the event that three or more replacement commercial properties are used, their total market value must not exceed 200% of the value of the commercial property that is being relinquished.

  • The 95% Exception - Finally, in the case that rules 1 and 2 do not apply, the aggregate value of the like kind commercial properties must account for at least 95% of the value of the commercial property being sold in order for the exchange to qualify.

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