You may identify up to three replacement properties regardless of their fair market value. You are not obligated to purchase all three properties but you must purchase at least one of the three identified. For example, if you sell a relinquished property for $100,000, you can identify three replacement properties with a combined fair market of $ 750,000, at least one of which must be purchased.

The 20% Value Rule:

You may identify more than three properties but their combined fair market value cannot exceed double (200%) the fair market value of the relinquished property. For example, if a relinquished property was sold for $100,000 and four or more replacements are identified, their combined fair market value cannot exceed $200,000 (i.e., 200% or double the sale price of the relinquished property).

Exceptions to the Three Property Rule and the 200% Value Rule

1. Any replacement property acquired within the 45-day Identification Period will be treated as properly identified, regardless of whether or not it is within the Three Property Rule or 200% Value Rule.

2. If the Three Property Rule and 200% Value Rule are violated, the replacement property will still be treated as properly identified, provided that 95% of the combined fair market value of the identified replacement property has been acquired. For example, assume you sell a $100,000 property and then identify five replacement properties with a combined fair market value of $800,000. This will be treated as proper, provided all five properties are acquired. It is almost impossible to acquire 95% of the property without acquiring all 100% of the property.