1031 Exchange Guidelines and Deadlines

By Orrin Barrow, Vice President

Kay Properties & Investments, LLC The 1031 rules state that you have EXACTLY 45 days after the date of sale to identify property and EXACTLY 180 days to complete the sale of that property. Within your 45 Days Identification window you can utilize three permissible identification methods. The first and most common for traditional 1031 exchanges are “the three-property rule” This states that you can identify 1, 2 or 3 properties, regardless of value. The policies also state that while using the three-property rule, you are not obligated to purchase all of the properties identified. You can purchase 1,2 or all three properties at your discretion. The second rule that many DST investors utilize is the “200% rule.” This rule stipulates that you can identify up to 200% of the value of your relinquished property. For example, if you sell your relinquished property for $1 million you have the opportunity to identify up to $2 million worth of property. DSTs investors often utilize the 200% rule because their DST choices for a diversified portfolio 1031 solution exceed the three-property rule. The last ID rule that exchangers can utilize is the “95% rule.” This rule states that you as an exchanger can identify more than three properties with a total value that is more than 200% of
the value of the relinquished property, but only if the investor acquires at least 95% of the value of the properties they have identified.

It is imperative that you as an exchanger understand how the rules work. One of the reasons is to make sure that you’re in line with IRS guidelines with the guidance of the qualified intermediary. It should also be noted that if you are looking to remove any of your 1031 exchange proceeds from your QI / Accommodator you must do so before your 45 Day Deadline. Due to regulation, once an exchanger passes the 45th ID deadline date, they must either invest their proceeds into properties that have been identified, or the QI will withhold the proceeds until after the 180th day. Once the 180th day is reached, funds will be released back to the exchanger and the investor will likely be liable for the taxes they owe on the amount that was received. If you would like more guidance or suggestions on your upcoming 1031 exchange please feel free to contact Kay Properties and Investments, LLC. We will promptly have a representative contact you to walk you through the steps to have a successful exchange.

About Kay Properties and www.kpi1031.com 

Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market.  Kay Properties team members collectively have over 115 years of real estate experience, are licensed in all 50 states, and have participated in over 15 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing.  IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation.  There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. If you are not the intended recipient of this message, any use, dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately notify the sender and permanently delete all copies that you may have. Securities offered through Growth Capital Services, member FINRASIPC, Office of Supervisory Jurisdiction located at 582 Market Street, Suite 300, San Francisco, CA 94104.

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