The tax-deferred exchange, as outlined in Section 1031 of the Internal Revenue Code, includes a number of steadfast rules that must be met in order to avoid taxing your sales proceeds.
The rules listed below provide a basic outline of the code’s parameters. Our brokers would be happy to meet with you to have an in-depth discussion of the 1031 code and how it applies to your investments in Las Vegas.
Timing and Identification of Replacement Property
As a taxpayer, you have 45 days from the date of sale of your property (a.k.a. the relinquished property) to identify a replacement property. Valid identification includes:
- Closing on the sale of the replacement property within the 45-day period, OR
- Identification and description of the replacement property before 11:59 p.m. on the 45th day
Multiple properties may be identified by the taxpayer as “replacement” for sales proceeds, as follows:
- Three Property Rule – the taxpayer/investor may identify up to 3 replacement properties without regard to their fair market value.
- 200% Rule – the taxpayer/investor may identify any number of replacement properties as long as the combined total fair market value of the properties does not exceed 200% of the value of the relinquished
- 95% Rule - the taxpayer/investor may identify any number of properties without regard to their fair market value, provided that the taxpayer/investor acquires at least 95 percent of the total value of such properties
When a property is properly identified within the 45-day period, the taxpayer/investor has a limit of 180 days to close the transaction and complete the exchange of property.