Requirements & Guidelines for a Section lO3l Tax-Deferred Exchange 

1.  Qualified Property.  With the exception of primary or summer residences, inventory, stocks, bonds, notes, partnership interests or other securities, any real and/or personal property usually can qualify for tax-deferred exchange treatment.

2.  Purpose Requirement.  All properties involved in a tax deferred exchange must be "held for productive use In a trade or business or for investment".  

3.  Like-Kind Requirement.  Usually any type of US investment real estate can be exchanged for any other type of US investment real estate, such as acreage for an apartment complex. Real estate can also be exchanged fori -- tenants in common (TIC) properties,-- thirty or more years leases.certain oil and gas ventures and properties to be built.

4.     Holding Period.  Generally, no minimum holding period after an exchange is required.  However, a 2-year holding period is required for exchanges between related parties.

5.     Exchange Requirement.  A Section 1031 tax-deferred transaction must involve an exchange of properties rather than a sale and purchase. The exchangor must neither receive nor be deemed to have "constructively" received the proceeds from the disposition of the relinquished property or the transaction will be considered a sale and not an exchange. A Qualified Intermediary can help with this requirement.

6.   Time Limits for Deferred Exchanges.

a)    Exchangor must identify the replacement property within 45 days after the disposition of the relinquished property; and

b)    Exchangor must close on replacement property before 180 days after the disposition of the relinquished property. 

7.   Multiple Properties.  Regardless of the number of properties relinquished, the number of replacement properties that may be identified as possible acquisitions is:

a)  Up to 3 properties, without regard to their fair market value (FMV);

b)   More than 3 properties, if their combined fair market value at the end of the 45 day identification period is not greater than 200% of the total FMV of all relinquished properties; or

c)   If the two rules noted above are not followed, then the exchangor must close on 95% of all the replacement properties identified.

d)   You may also want to Refer to the statute.

E-mail: qis@1031exchangeservices.com

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