Susan Ormont - RISK VERSUS REWARD: A SIMPLE GUIDE FOR INVESTING IN REAL ESTATE

From the time of closing on the relinquished property, the investor has 45 days to nominate potential replacement properties and a total of 180 days from closing to acquire the replacement property. Identification requirements: The investor must identify the replacement property prior to midnight on the 45th day. The investor normally nominates three potential properties of any value, and then acquires one or more of the three within 180 days. Typically, a common address or an unambiguous description will suffice. If the investor needs to identify more than three properties, it is advisable to consult with your 1031 facilitator. WHAT RESTRAINTS DO I FACE WHEN IDENTIFYING MY REPLACEMENT PROPERTY(IES)? As an Exchangor, you are required to provide an “unambiguous description” of the potential replacement property on or before the 45th day after closing on the relinquished property. (A legal description or property address will suffice). If you wish to identify or purchase multiple properties, you must follow one of the following guidelines: Identify up to three properties of any value with the intent of purchasing at least one. Identify more than three properties with an aggregate value that does not exceed 200% of the market value of the relinquished property. Identify more than three properties with an aggregate value exceeding 200% of the relinquished property, knowing that 95% of the market value of all properties identified must be acquired. WHAT CLOSING COSTS CAN BE PAID WITH EXCHANGE FUNDS AND WHAT CANNOT? The IRS stipulates that in order for closing costs to be paid out of exchange funds, the costs must be considered a Normal Transactional Cost. Normal Transactional Costs, or Exchange Expenses, are classified as a reduction of boot and increase in basis, where as a Non Exchange Expense is considered taxable boot... (In this article there is a chart of what is and is not a

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