Identification Rules
The Identification Notice must contain an unambiguous description of the Replacement Property and must be signed by the Exchanger. The Identification Notice must include the legal description, a street address or a distinguishable name. In addition, when the Exchanger intends to improve the Replacement Property during the Exchange Period the Exchanger must include an adequate description of the underlying land and a description in as much detail as is practicable at the time of the identification of the proposed construction or improvements.
Exchangers have the flexibility of identifying more than one property as Replacement Property for their exchange. The options for identification are: |
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Three Property Rule: The Exchanger may identify as potential Replacement Property any three properties, without limits on the fair market value. (Keep in mind that to meet the IRS Guidelines you should purchase equal or greater value property.) |
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200% Rule: The Exchanger may identify as potential Replacement Property any number of properties provided the aggregate fair market value of all of the identified properties does not exceed 200% of the aggregate fair market value as of the date of the transfer of all of the Relinquished Properties. |
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95% Exception: If the Exchanger identifies more potential Replacement Properties than allowed under the 200% Rule, the Exchanger must receive Replacement Property by the end of the Exchange Period that has a fair market value of at least 95% of the aggregate fair market value of all of the identified Replacement Properties. |
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| The time periods for the 45-day Identification Period and the 180-day Exchange Period are very strict and cannot be extended even if the 45th day or 180th day falls on a Saturday, Sunday or legal holiday. They also apply in a reverse exchange transaction. |
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