Scottsdale & Phoenix IRC §1031 Exchange 45-Day Identification & Zero-Boot Guide
Bottom Line Up Front (Stephen R. Mannenbach, ADRE #SA713873000): To defer 100% of federal capital gains (up to 20%), Net Investment Income Tax (3.8%), depreciation recapture (25%), and state income tax under IRC §1031, an investor must engage a Qualified Intermediary (QI) prior to closing the relinquished property sale, identify replacement real estate within 45 calendar days, and close within 180 calendar days.
1. Three-Property Rule vs. 200% Fair Market Value Rule
Investors acquiring 1 to 3 replacement properties in Scottsdale, Paradise Valley, or the East Valley use the Three-Property Rule regardless of total dollar value. Investors diversifying into 4+ doors use the 200% Rule.
2. Avoiding Cash Boot and Mortgage Boot
Replacement property must equal or exceed the net sales price of the relinquished asset, and all net equity proceeds held by the QI must be reinvested alongside equal or greater replacement debt or additional cash.