A typical 1031 exchange involves the buying and selling of one like-kind business or investment property for another. However, selling one property and acquiring several replacement like-kind properties or selling several properties and buying one replacement property is also allowed, assuming the exchange follows designated guidelines. Additionally, an investment property can be exchanged for a business property, so long as both are like-kind.
Although IRC Section 1031 enables a property owner/exchanger to acquire multiple properties, it is important to remember that the identification rules apply differently to multiple property situations. An exchanger may identify up to three like-kind properties as replacement property per exchange, regardless of value, or any number of replacement properties as long as their aggregate value does not exceed 200% of the fair market value of the relinquished property(ies). An exchanger can also identify any number of replacement properties as long as they actually acquire at least 95% of the value of all the properties that were identified.
Either way, if an exchanger has multiple 1031 exchange properties they wish to undertake, they must apportion their original basis in the relinquished property(ies) amongst the replacement property(ies).
Using a Qualified Intermediary who is very experienced with handling all types of exchanges is the best way to increase likelihood for a successful exchange.
What is a 1031 exchange? Find out more by downloading our 1031 Exchange Kit.
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