The "200% Rule" is one of the three identification rules that taxpayers can use when engaging in a 1031 exchange to identify potential replacement properties. This rule is particularly useful when you want to have flexibility in choosing from multiple potential replacement properties. Here's how it works:

Understanding the 200% Rule:

When you sell your relinquished property in a 1031 exchange, you must identify potential replacement properties within 45 days. The 200% Rule allows you to identify any number of properties as long as their combined fair market value does not exceed 200% of the fair market value of the relinquished property.

Example:

Let's say you sold a relinquished property for $500,000. Under the 200% Rule, you can identify multiple replacement properties, but their total fair market value cannot exceed $1,000,000 (which is 200% of $500,000).

1. Relinquished Property:
   • Sale Price: $500,000
2. Replacement Properties Identified:
   • Property A: $300,000
   • Property B: $400,000
   • Property C: $250,000

In this example, the total value of the identified properties is $950,000, which is within the 200% limit of $1,000,000. Therefore, you are in compliance with the 200% Rule.

Role of Deferred.com as a Qualified Intermediary:

At Deferred.com, we act as your qualified intermediary to facilitate the 1031 exchange process. Our "No Fee Exchange" service helps you save money while ensuring compliance with IRS regulations. As your intermediary, we hold the proceeds from the sale of your relinquished property and use them to acquire the identified replacement properties on your behalf. This ensures that you do not have constructive receipt of the funds, which is crucial for maintaining the tax-deferred status of the exchange.

Why Use the 200% Rule?

The 200% Rule is beneficial if you want to have a wide range of options for replacement properties. It provides flexibility, especially in competitive real estate markets where having multiple options can increase the likelihood of successfully completing the exchange within the required timeframe.

Important Considerations:

• Identification Period: You must identify the replacement properties within 45 days of selling your relinquished property.
• Exchange Period: You must acquire the replacement properties within 180 days of the sale.
• Compliance: Ensure that the total value of identified properties does not exceed 200% of the relinquished property's value to avoid disqualification.

By using Deferred.com as your qualified intermediary, you can navigate the complexities of the 1031 exchange process with confidence, knowing that we are here to support you every step of the way. If you have any further questions or need assistance with your exchange, feel free to reach out to us.