The Exchanger has forty-five (45) days from the sale of the relinquished property to identify potential replacement properties. The Exchanger must also acquire the replacement property within the earlier of one hundred eighty (180) calendar days after the transfer of the relinquished property or the due date (including extensions) of the Exchanger’s tax return. The Exchanger must provide written descriptions of the replacement properties by midnight of the 45th day and the following guidelines must be met:

● 3-Property Rule: The Exchanger may identify up to 3 properties of any value with the intent of purchasing at least one.

● 200% Rule: The Exchanger may identify more than 3 properties with a combined value that does not exceed 200% of the market value of the relinquished property.

● 95% Rule: The Exchanger may identify more than 3 properties and must acquire replacement properties with a combined market value of at least 95% of the combined market value of all identified properties before the end of the 45-day exchange period.

Proper Purpose

Both the relinquished and replacement properties must be held for productive use in a trade, business or for investment. The Exchanger’s personal residence will not qualify.

Qualifying Property

Most business or investment assets qualify for Section 1031 treatment, with the exception of the following:

● Property held primarily for sale

● Inventories

● Stocks, bonds or notes

● Other securities or evidences of indebtedness

● Interests in a partnership

● Certificates of trusts or beneficial interest

Generally speaking, almost any other type of property may qualify for Section 1031 treatment. Check with your Exchange Attorney for clarification on your individual situation.


In a properly structured 1031 Exchange, the exchange of relinquished property for replacement property must be of “like kind.” For real estate purposes, like-kind property refers to real property located in the United States and some of its territories. Properties located outside of the United States is not considered to be like-kind to property located in the United States. Real property and personal property are also not like-kind to one another. For example, a commercial building may not be exchanged for heavy construction equipment. For more information on Like-Kind Exchanges, visit the IRS fact sheet here.