Tax Deferred Exchange Rules
Tax Deferred Exchange Rules
Tax Deferred Exchange rules require a real estate investors to identify potential replacement
rental real estate within 45 days of the close of escrow and acquire the replacement
rental real estate (or
rental real estate ) within 180 days of close of the relinquished rental real estate. Furthermore, when choosing a replacement
tax deferred exchange rental real estate for the tax deferred exchange, the
real estate investor must follow one of the following
tax deferred exchange rules:
The Three-Rental Real Estate Rule - Any three rental real estate regardless of their market values may be identified by the exchanger as potential replacement rental real estate for the like kind exchange, however no more than 3 rental real estate may qualify.
The Two Hundred Percent Rule - This rule dictates that, if three or more replacement rental real estate are chosen, their total aggregate value may not exceed 200% of the value of the acquired rental real estate at its time of selling.
The Ninety-five Percent Exception - Finally, in the event that rules 1 and 2 are null and void, rule 3 takes precedence. This rule states that, if three or more replacement rental real estate are used in the transaction, their total market value must comprise at least 95% of the value of the rental real estate being relinquished.
It is worthy to note that many tax deferred exchange real estate investors are drawn to tenants in common exchanges due to the pre-approved financing options available.