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1031 Tax-Deferred Exchanges

Property held for productive use or investment may be exchanged and the tax deferred under Internal Revenue Code Section 1031. 1031 regulations allow you to choose a replacement property by using any of the following three rules:

• Three Property Rule: Three properties no matter what their value.
• 200 Percent Rule: Any number of properties as long as their combined fair market value does not exceed 200% of the fair market value of all relinquished property.

Interchangeable Terms:

Relinquished Property = Property being sold = Downleg

Replacement Property = Property being acquired = Upleg

Definition of Like-Kind Property is:

"In a 1031 real property exchange you can exchange any real property for any other real property within the United States or its possession IF said property(ies) are held for productive use in business or trade or for investment purposes."

1031 Property examples:

- Commercial
- Duplexes
- Rental Home
- Vacation-Homes
- Apartments
- Raw Land
- Condos
- Second Homes

Examples that are not a 1031 Property

- Personal Residence

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