Key Takeaways
- IRC §1031 defers capital gains by exchanging investment properties — the 45-day identification and 180-day closing deadlines are absolute.
- A Qualified Intermediary must hold exchange funds — the investor can never have actual or constructive receipt of the money.
- Identification rules: Three-Property Rule (up to 3), 200% Rule (unlimited but capped at 200% of sale price), or 95% Rule.
- Common pitfalls include receiving boot, using disqualified QIs, and missing deadlines — each triggers partial or full tax liability.
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Test Your Knowledge
1.Within how many calendar days of selling the relinquished property must a 1031 exchange investor identify replacement properties?
2.Under the Three-Property Rule, how many replacement properties can be identified?
3.What is the role of a Qualified Intermediary (QI) in a 1031 exchange?