Spectrus Real Estate – Investment Real Estate Glossary
|
- 180 days
-
Total time allotted to acquire the replacement property. Must be one of the properties designated in
the identification period.
- 200% rule
-
You may identify any number of properties as possible replacements for your relinquished property
as long as the aggregate value of those properties does not exceed 200% of the value of your
relinquished property.
- 3-property rule
- You may identify any three properties for possible replacements for your relinquished property. More than 95% of exchanges use the 3-property rule.
- 95% exemption
-
You may identify any amount of properties as possible replacements for your relinquished property as
long as you end up purchasing at least 95% of the aggregate value of all properties identified.
- 1031 exchange rules
- The real property you sell and the real property you buy must both be held for productive use in a trade or business or for investment purposes and must be like-kind. The proceeds from the sale must go through the hands of a qualified intermediary and not through your hands or the hands of one of your agents or else all the proceeds will become taxable. All the cash proceeds from the original sale must be reallocated to the replacement property – any cash proceeds that you retain will be taxable. The replacement property must be subject to an equal or greater level of debt than the relinquished property or the buyer will either have to pay taxes on the amount of decrease or have to put in additional cash funds to offset the lower level of debt in the replacement property. More information about the 1031 Exchange rules in our FAQ section.
- 1031 timelines
Identification period: Within 45 days of selling the relinquished property, you must identify suitable replacement properties. The 45-day rule is very strict and is not extended should the 45th day fall on a Saturday, Sunday, or legal holiday. Exchange period: The replacement property must be received by the taxpayer within the exchange period, which ends within the earlier of 180 days after the date on which the taxpayer transfers the property relinquished, or the due date for the taxpayer tax return for the taxable year in which the transfer of relinquished property occurs. The 180-day rule is very strict and is not extended should the 180th day fall on a Saturday, Sunday, or legal holiday.
Also see Exchange Period.
|
|