1031 Exchange Rules
1031 Exchange Rules
All 1031 exchanges must comply with at least one of the following three 1031 rules in order to qualify as such:
1) The Three-Commercial Real Estate Rule - This rule allows the exchanger to identify up to a total of 3 potential replacement commercial real estate within the Acquisition Period.
The Two Hundred Percent Rule dictates that if three or more commercial real estate are identified, the aggregate market value of all commercial real estate may not exceed 200% of the value of the commercial real estate, which was sold.
The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement commercial real estate acquired represent at least 95% of the aggregate value of commercial real estate identified, the exchange will still qualify.
In their 1031 exchange, many real estate investors benefit from buying 1031 real estate as tenancy in common because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.