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Video: 1031 Exchange: 75% or "Substantially the Same" Rule
In a 1031 Exchange you must identify your potential Replacement Property by Day 45. But, what happens if you acquire a fractional interest, or less than 100% ownership, of one of the properties identified in your 1031 Exchange? That’s where the 75% Rule, also known as the "Substantially the Same Rule," comes into play.
This video explains how the rule applies to fractional ownership interests, such as Tenants-In-Common (TIC) or Delaware Statutory Trusts (DSTs), and how a 25% margin of error is allowed by the IRS regarding identified Replacement Properties. In this video, we also provide practical examples, such as scenarios where 75% or more of the identified property is acquired, more property than originally identified is acquired, and managing fractional DST interests. Additionally, we consider differing interpretations of the rule amongst Qualified Intermediaries (QIs).
Learn how this rule provides flexibility while remaining compliant with 1031 Exchange requirements.
