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Replacement Property Identification Guidelines

Property Identification Rules

There are three ways replacement property can be identified according to the IRS:

  1. Three-Property Rule – Allows an investor to identify up to three potential replacement properties and close on any or all of them to complete the exchange.

  2. 200% Rule – Allows any number of properties to be identified as long as their total value does not exceed twice the value of the relinquished property. Similarly to the 3-Property Rule, once identified, any or all of the potential replacement properties can be purchased to complete the exchange.
  3. 95% Rule – Allows an investor to identify an unlimited number of properties, but the investor must purchase 95% of the aggregate fair market value of all of the properties identified.