There are a lot of rules that you have to follow when conducting a 1031 exchange of real estate. One such rule is the incidental property rule. In this article, we’re going to discuss the incidental property rule and what it means for in a 1031 exchange of real estate.
Incidental Property Rule
The incidental property rule is one of many rules that pertain to 1031 exchanges of real property. This particular rule relates to the 45 day replacement property identification rule that states that the taxpayer must identify in writing their replacement property within the first 45 days of their exchange period.
If this identified replacement property includes any incidental property that would normally be transferred with the property in a typical transaction, that incidental property does not need to be identified. One additional caveat is that the incidental property cannot be more than 15% of the value of the larger replacement property. As an example, consider an apartment complex that has laundry machines, and furniture. These items of incidental property would not need to be separately identified unless they total more than 15% of the value of the apartment complex.
Minnesota Like-Kind Exchanges of Real Property
Commercial Partners Exchange Company has two decades of experience facilitating like-kind exchanges of real property. We work with clients in Minnesota and around the country. A qualified intermediary works with the taxpayer conducting the exchange. We can answer any questions you might have, prepare all of your documents, and advise you throughout the process. Contact us today to get your exchange up and running!