Exchangers do not usually fail because the rules are hard. They fail because forty-five days is not enough time to find something they actually want, and the alternative to a bad purchase is a tax bill.
| Rule | What it allows | Practical use |
|---|---|---|
| Three-property | Up to three properties, any value | The default. Most exchangers use this. |
| 200 percent | Any number, aggregate value up to 200% of what was sold | When spreading across several smaller assets. |
| 95 percent | Any number and any value, but you must acquire 95% of identified value | Rarely used. Very little margin for a deal to fall out. |
Under the three-property rule the discipline is not identifying, it is having three real candidates rather than one real one and two decoys that will not close.
The pressure of the window pushes exchangers into assets they would not otherwise own: a management-intensive property they cannot operate, a tertiary market they do not know, or a cap rate they talked themselves into on day forty-three. The tax was deferred and a worse problem was acquired.
The honest comparison is not replacement property against tax. It is replacement property against tax plus the freedom to buy well later.
Most of the identification problem is counterparty risk: the property exists, but the seller has their own timeline, their own lender and their own reasons to slip. An exchanger needs certainty far more than they need optionality.
A newly created leased fee has an unusual property here. Because the transaction is being structured rather than found on the market, the closing date is a term rather than a constraint. There is no existing seller to wait for, no tenant estoppel chain and no financing contingency on the fee.
It is also complete on acquisition. Passive, no management, no capital expenditure, fixed escalations, ninety-nine years. Whether that is the right asset is a question for the exchanger and their advisors. Whether it can hit a date is not in doubt.
A blown identification is not fixable after the fact. The realistic planning move is to decide before day one what the third identified property is, and to choose it for certainty rather than for upside. The third slot is insurance, not a lottery ticket.
On the transfer of the relinquished property. It runs concurrently with the one hundred eighty day period, not after it.
Not for ordinary deal problems. Limited federally declared disaster relief exists, but it is not something to plan around.
Three of any value under the three-property rule, or any number up to two hundred percent of the relinquished value, or any number if you acquire ninety-five percent of what you identified.
No. It is fixed once the window closes.
Buying badly under time pressure rather than missing a deadline outright. The tax is deferred and a worse asset is acquired.
Because there is no existing seller with an independent timeline. The closing date is negotiated as a term of the transaction.
Tell us the date you have to close and the size you have to place. Certainty on timing is the part we can answer immediately.
Email us the property