Fairhaven Realty
Fairhaven Realty
Fairhaven Realty, a br of Lakeway Realty, Inc.

Q & A - 1031 Exchanges

Posted on January 29, 2010
It's a chilly Friday, January 29, 2010 in Bellingham, WA, but so far, it's not raining! Did you know that we provide a list of bank-owned properties or foreclosures? Feel free to stop by this weekend and get your personal copy.

QUESTIONS AND ANSWERS ON 1031 TAX EXCHANGES (continued from previous blogs).
Is there a limit to the number of properties that can be identified?
There are three rules that limit the number of properties that can be identified. The taxpayer must meet the requirements of at least one of these rules:
  • Three-property Rule: The taxpayer may identify up to 3 potential replacement properties, without regard to their value; or
  • 200% Rule: Any number of properties may be identified, but their total value cannot exceed twice the value of the relinquished property, or
  • 95% Rule: The taxpayer may identify as many properties as he wants, but before the end of the exchange period the taxpayer must acquire replacement properties with an aggregate fair market value equal to at least 955 of the aggregate fair market value of all the identified properties.
What are the requirements to properly identify replacement property?
Potential replacement property must be identified in writing, signed by the taxpayer, and delivered to a party to the exchange who is not considered a "disqualified person.ï" A "disqualified" person is any one who has a relationship with the taxpayer that so close that the person is presumed to be under the control of the taxpayer. Examples include blood relatives, and any person who is or has been the taxpayer's attorney, accountant, investment banker or real estate agent within the two years prior to the closing of the relinquished property. The identification cannot be made orally.

*Information gathered/quoted from the National Association of REALTORS® online library-1031 Exchange-FEA (Federation of Exchange Accommodations)

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Fairhaven Realty, a Branch of Lakeway Realty Inc. | 1100 11th Street, Bellingham, WA 98225 | Office: 360-676-8990 | Fax: 360-734-5109
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