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Exchange Rules


Exchange Rules

IRS internal revenue code stipulates that exchangers must identify potential replacement commercial properties withing 45 days of the close of escrow and acquire said commercial property (or commercial properties ) withing 180 days of the closing of the relinquished commercial property. Furthermore, property investors must comply with one of the following rules:

  • The Three-Commercial Property Rule - Seller must identify up to a total of three potential replacement commercial properties within the Acquisition Period.

  • The Two Hundred Percent Rule - This rule dictates that, in the event that three or more like kind commercial properties are selected as replacement commercial properties, the aggregate market value of said commercial properties may not exceed 200% of the market value of relinquished commercial property.

  • The Ninety-five Percent Exception In the even that rules 1 and 2 do not apply, the Ninety-Five Percent Exception takes precedence. This rule dictates that the aggregate market value of all replacement commercial properties must represent at least 95% of the value of the relinquished commercial property in order for the exchange to still qualify.

    Many exchangers choose TIC exchanges because of the efficiency in closing---which is due, in large part, to pre-arranged financing available.

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