Sale Of 1031 Exchange Property
June 21st, 2006Question: I’m doing a 1031 exchange. The rule: Can’t buy property > 200% of the original price. Can someone clarify?
So I’m selling a rental place and buying another for a 1031 exchange. The rule is that the new property can’t be 200% more than the original sale price of the old property. What does that mean? Is it 200% of the full sale price, or after the broker fees and such (net)? Also does 200% mean if I sold a place for $100,000, then the new place I buy can’t be more than $200,000?
Thanks!
Answer: There are 3 rules that outline how the identification in a 1031:
The one which fits you is the 3 Property Rule – You have an ability to identify up to 3 properties without regard to their fair market value for identification purposes. So, if you are selling one and purchasing another, you need not worry about the 200% rule.
Now, if you were to identify 4 or more properties, then you run into the 200% rule. It basically states that if you identify by the 200% rule then the combined fair maket values of the identified properties cannot be more than 200% of the fair market value of the relinquished property.
Again, if you are selling and only purchasing one other property, no need to worry!
Feel free to call me at 336-633-8970 if you have any other questions.
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