1031 Exchange: Replacement Property Identification

Three Property Rule (most common)

The exchanger may identify up to three properties of any value without restrictions.

200% Rule

The Exchanger may identify more than three properties if the total fair market value of what is identified does not exceed 200%(double) of the fair market value of the relinquished property.

The 95% Exemption

If the exchanger identifies more than three properties and the fair market value of the combined replacement properties exceeds 200%, then the Exchanger must acquire 95% of the aggregate value of all properties identified.

Internal Revenue Code
26 U.S.C. §1031

No gain or loss shall be recognized on the exchange of productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.