1031 EXCHANGE 
RULES IN CALIFORNIA

The Exchange Steps

1031 Exchange Rules in California outline a three-step process, each with a crucial time frame that must be met for investors to defer capital gains tax payments. These steps are essential for successfully completing a 1031 exchange and reaping its benefits.

Sell
Existing Property

Identify Replacement Property

Purchase Replacement Property

Sell Existing Property

To initiate the process, an investor must first sell their existing property while adhering to the 1031 Exchange Rules in California. The day the property closes, known as Day Zero, marks the beginning of the 1031 exchange timeline, guided by California-specific regulations.

Once the property is sold, all proceeds must be placed with a qualified intermediary.

Identify Replacement Property

Investors must identify their replacement properties within 45 days after closing their relinquished property. Investors must follow one of these three rules outlined by the IRS when identifying their replacement property. See below:

Purchase Replacement Property

Following the 1031 Exchange Rules in California, all replacement properties must be purchased within 180 days from the close of the relinquished property. By adhering to this timeline and all other requirements of the 1031 exchange, investors can successfully enjoy the benefits of this tax-deferred transaction.

When You Identify
Your Replacement
Property

It’s important to note that to complete the exchange, the entire value of the real estate must be reinvested. All sale proceeds must be reinvested, and all debt must be replaced.
  • The 3-Property Rule: Investors can select up to 3 properties as their replacement properties and purchase one or all of them.
  • The 200% Rule: Investors can identify any number of properties as their replacement properties as long as their aggregate fair market value does not exceed 200 percent of the relinquished property’s aggregate fair market value.
  • The 95% Rule: Investors can identify as many properties as they want so long as they purchase at least 95 percent of all identified replacement properties’ aggregate fair market value.
SEE LISTINGS

For more information on the 1031 Exchange Rules in California as well as other resources, visit Perch Wealth.

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Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only. Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership.
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1031 Risk Disclosure:

  • There is no guarantee that any strategy will be successful or achieve investment objectives;
  • Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
  • Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
  • Potential for foreclosure – All financed real estate investments have potential for foreclosure; ·Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;
  • Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
  • Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits


No offer to buy or sell securities is being made. Such offers may only be made to qualified accredited investors via private placement memorandum. Risks detailed in a private placement memorandum should be carefully reviewed, understood, and considered before making such an investment. Prospective strategies and products used in any tax advantaged investment planning should be reviewed independently with your tax and legal advisors. Changes to the tax code and other regulatory revisions could have a negative impact upon strategies developed and recommendations made. Past performance and/or forward-looking statements are never an assurance of future results.

Many of the investments offered will be only available to those investors meeting the definition of an Accredited Investor under SEC Rule 501(A) and offered as Regulation D private placement securities via a Private Placement Memorandum (“PPM”). Prospective investors must receive, read, and understand all the risks associated with buying private placement securities. Investments are not guaranteed or FDIC insured and risks may include but are not limited to illiquidity, no guarantee of income or guarantee that all tax advantages or objectives will be met and complete loss of principal investment could occur.

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