Identification in a 1031 exchange refers to the process of selecting and identifying the replacement property or properties that will be acquired in the exchange. The Internal Revenue Code sets forth specific rules for the identification of replacement property, including the number of properties that can be identified, the timing of the identification, and the manner in which the properties are identified.
- Identification in a 1031 exchange refers to the process of selecting and identifying the replacement property or properties.
- The Internal Revenue Code sets forth specific rules for the identification of replacement property, including the number of properties that can be identified, the timing of the identification, and the manner in which the properties are identified.
Suppose an investor sells a commercial property in a 1031 exchange and plans to purchase a replacement property. The investor must identify the replacement property within 45 days of the sale of the original property, and must provide a written description of the property to the qualified intermediary. The investor may identify up to three replacement properties, as long as the fair market value of all properties identified does not exceed 200% of the sales price of the original property.
- Familiarize yourself with the rules for identification of replacement property in a 1031 exchange.
- Work with a qualified intermediary or other professional to ensure that the identification process is carried out properly.
- Work with a qualified intermediary or other professional to assist in the 1031 exchange process, including the identification of replacement property.
- Consider alternative investment strategies if the identification requirements may not be feasible or desirable.
- Carefully evaluate the risks and rewards of a 1031 exchange, taking into account the identification requirements and their potential impact on the investment.