The "Like Kind" Requirement

For real estate, like kind refers not in the nature or quality of the property, but to the underlying definition of real estate under state law. If a property meets the definition of real estate under state law, that property is like kind to a property in another state defined as real estate. (Personal property rules are much, muck more complex.)

The Value/Debt/Equity Calculations

If a fully tax deferred exchange is the goal, the following rules must be strictly adhered to:

1. The value of the replacement property must be equal to or greater than the value of the relinquished property.
2. The debt on the replacement property must be equal to or greater than the debt on the relinquished property.
3. The equity in the replacement property must be equal to or greater than the equity in the relinquished property.

Exception to the Value/Debt/Equity – Debt reduction (Debt relief) can be offset by additional funds invested by the exchanger.

The 45/180 Day Requirement

1. The property to be received must be identified within 45 days of settlement (transfer) of the relinquished property.
2. The received property must be settled (transferred) within 180 days of the settlement date of the relinquished property.

These dates are strictly enforced.

Identification Rules

Rule 1 – Any Property closed on within the 45 days is automatically considered identified.

NOTE: Please seek competent accounting and legal advice prior to entering into a tax-deferred exchange.

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