There are three 1031 exchange rules that limit the number of properties that can be identified. The taxpayer must meet the requirements of at least one of these three 1031 exchange rules:
- First 1031 exchange rule: 3-Property Rule – The taxpayer may identify up to 3 potential replacement properties, without regard to their value; or
- Second 1031 exchange rule: 200% Rule – Any number of properties may be identified, but their total value cannot exceed twice the value of the relinquished property, or
- Third 1031 exchange rule: 95% Rule – The taxpayer may identify as many properties as he wants, but before the end of the exchange period the taxpayer must acquire replacement properties with an aggregate fair market value equal to at least 95% of the aggregate fair market value of all the identified properties.