Exchanges must be completed within strict time limits.  The Exchanger has 45 days from the date the relinquished property closes to “Identify” potential replacement properties.  This involves a written notification to the Qualified Intermediary listing the addresses or legal descriptions of the potential replacement properties.  The purchase of the replacement property must be completed within 180 days after the close of the relinquished property.  After the 45 days has passed, the Exchanger may not changer their Property Identification list and must purchase one of the listed replacement properties or the exchanger fails.

To avoid the payment of capital gain taxes, the Exchanger should follow three general rules: Purchase a replacement property that is the same or greater value as the relinquished property; Re-invest all of the exchange equity into the replacement property; and Obtain the same or greater debt on the replacement property as on the relinquished property.

The Exchanger can offset the amount of debt obtained on the replacement property by putting the equivalent amount of additional cash into the exchange.

The Exchanger must sell property that is held for income or investment purposes and acquire replacement property that will be held for income or investment purposes.