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If you need any assistance or have questions, please contact us at 888-800-1031 or email


Seven Characteristics of A Successful Forward Exchange


By understanding these seven concepts, a taxpayer will be well on the way to completing a successful forward 1031 exchange.

1. Like-Kind

The relinquished property must be “like-kind” to the replacement property. All real property is deemed to be “like-kind” with other real property.

2. Investment Intent

In order to qualify for tax deferred treatment on the exchange, both the relinquished property and the replacement property must be held for investment or for productive use in a trade or business (this is the “qualified use” requirement for properties sold and purchased in 1031 exchanges).

3. Qualified Intermediary (“QI”)

In order to qualify for safe harbor tax deferral, exchange proceeds from the sale of the relinquished property must be held by a QI until they are ultimately used for the purchase of replacement property. At no time can the taxpayer have access to the proceeds from the sale of the relinquished property.

4. Exchange Deadlines

In a forward exchange, taxpayers have 45 days from the sale of the relinquished property to identify potential replacement property, and 180 days from the sale to close on, and take title to, properly identified replacement property.

5. Identification Rules

Taxpayers may identify up to three replacement properties of any value during the 45-day identification period, or more than three properties if certain requirements are considered. If you identify more than three, then you will be subject either to the 200% Rule and possibly to the 95% Rule.  The 200% Rule requires that the combined values of all of the properties you identify cannot exceed 200% of the sale price of your relinquished property.  If it does, then you will be subject to the 95% Rule, requiring you to close on the purchase of 95% of the combined values of the properties you identified (basically, you will have to buy every property you identified in order for your exchange to succeed).  You will not be subject to these two rules if you identify three or fewer replacement properties.

6. Exchange Formula

A simple formula to remember is that, in order to maximize the tax deferral available by doing an exchange, the value of the replacement property must equal or exceed the net sales price of the relinquished property (the TRV), and all of the cash proceeds must be used for the purchase. If this threshold is not reached, the taxpayer must pay tax on the shortfall.

7. Ownership ("Same Taxpayer") Requirement

The taxpayer that sells the relinquished property must be the same taxpayer that acquires the replacement property (NOTE: taxpayer may use a single-member LLC of which it is the sole member as a disregarded entity to purchase the replacement property).

Strategic 1031 Exchange Advisors, LLC, a Georgia limited liability company, is a qualified intermediary for 1031 exchanges only. It is not an accounting firm, law firm or registered investment professional and therefore is not qualified to give accounting, tax, legal or investment advice, and, further, cannot act in an agency capacity on behalf of its clients. This website is for informational purposes only and does not and is not intended to constitute accounting, tax, legal or investment advice. We advise you to consult with your accountant, attorney and investment professional on all matters related to your exchange.

Have questions about your investment property? Contact us before selling and we can help walk you through the process.