Are you a real estate investor planning to execute a 1031 exchange? Then, you must comply with some top identification rules when selecting a replacement property. In this video, we'll discuss the ten identification rules that you need to know.
The first three rules include the 3-Property Rule, where investors can identify up to three replacement properties, the 200% Rule, allowing investors to identify more than three properties if their combined value does not exceed 200% of the sold property's fair market value, and the 95% Rule, where investors can identify any number of properties as long as their total fair market value is at least 95% of the sold property's value.
You must also identify your potential replacement properties within 45 days after selling the relinquished property and provide a detailed description to your Qualified Intermediary.
Moreover, the replacement properties must be like-kind to qualify for tax-deferred treatment, and the taxpayer who sells the relinquished property must be the same as the one buying the replacement property.
Furthermore, to avoid triggering the 1031 exchange boot, you must reinvest 100% of the sales proceeds and cannot significantly change the list once you've identified replacement properties to your QI.
Stay tuned for our next video to learn more about 1031 exchanges. Sign up for our portal and connect with the best-in-class advisors to guide you through the process.
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