Posted by Dave T on December 22, 1999 at 21:13:02:
Let me recap the three property identification rules to which you refer. You need to satisfy only one of the following rules to make a 1031 exchange available. Violation of ALL THREE rules makes the “exchange” fully taxable.
The Three Property Rule. The taxpayer may identify three replacement properties. If no more than three properties are properly identified within the proper time frame, then a 1031 exchange is available to the taxpayer.
The 200% Rule. If the taxpayer designates MORE THAN three properties, the total fair market value of all identified properties may not exceed 200% of the fair market value (on the date of transfer) of the relinquished property. Thus a 1031 exchange is still available to the taxpayer, even though more than three properties are identified within the proper time frame, if the aggregate fair market value does not exceed 200% of the value of the property given up.
Purchase 95% of All Identified Property. If the taxpayer purchses 95% of the fair market value of all properties originally identified, the three property and the 200% limitation rules do not apply.
Hope this clarifies the property identification issue for you. Of course, for a valid 1031 exchange, you still have to satisfy the like-kind rule and the rules for properly receiving the replacement property within the required time frame.