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1031 Exchange Rules

To successfully defer capital gains taxes, investors need to satisfy the following 1031 exchange rules:

1. Purchase a property of equal or greater value.

2. Reinvest all equity in a replacement property. Note: any equity not reinvested will be subject to tax.

3. Obtain equal or greater debt on the replacement property. Exception: A reduction in debt can be offset with additional cash from the exchanger.

1031 exchange rules requirements graphic

What is 1031 Exchange Eligible?

✓   1031 Exchange Eligible:

✗   1031 Exchange Ineligible:

• Fractional (tenancy-in-common) interest

• Motels/Hotels

• Single Family Rentals

• Farms/Ranches

• Offices/Commercial

• Multifamily Rentals

• Raw Land

• Leasehold interests of 30 years or more

• Personal Residence

• Real Estate Investment Trusts (REITs)

• Construction or fix/flips for resale

• Stockes, bonds or notes

• Interests in a partnership

1031 Exchange Timeline

1031 exchange timeline

DAY 1:  Sale of relinquished property  •  Identification period starts

DAY 45:  45 Day Rule = Exchanger has 45 days to identify potential replacement properties and report them to their qualified intermediary.

DAY 180:  The exchange must be completed no later than 180 days after the sale of the relinquished property. This is the last day to purchase one or more of the replacement properties previously identified. 

*Remember : These are calendar days, not business days.

Ways to Identify Replacement Property

1. Three Property Rule:  Identify 3 replacement properties, regardless of their fair market value.

2. 200% Rule:  Identify any number of replacement properties, as long as the total fair market value of them does not exceed 200% of the FMV of all the relinquished properties as of the initial transfer date. 

3. 95% Rules:  Identify any number of replacement properties at any value. The catch: if you select this identification method, you must acquire properties with a combined fair market value of at least 95% of the total value of all properties identified. 

Perch Wealth provides you with access to institutional-quality real estate, management, financing and state of the art 1031 exchange processing.



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31351 Rancho Viejo Road
Suite 111
San Juan Capistrano,
California 92675

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FEA Federation of Exchange Accommodators

Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only. Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership.

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Real Estate / 1031 Risk Disclosure:
  • There’s no guarantee any strategy will be successful or achieve investment objectives;
  • All real estate investments have the potential to lose value during the life of the investments;
  • The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
  • All financed real estate investments have potential for foreclosure;
  • These 1031 exchanges are offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;
  • If a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
  • Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits;
  • Tax benefits are not guaranteed and are subject to changes in the tax code.