1. Three Property,
2. Two Hundred Percent, and
3. Ninety-five Percent Exception

The Three Property Rule dictates that the investor may identify three properties of any value, one or more of which must be acquired within the 180 Day Acquisition Period.

The Two Hundred Percent Rule states that if three or more properties are identified, the aggregate market value of all properties may not exceed 200% of the value of the property which was sold.

The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement properties acquired represent at least 95% of the aggregate value of properties identified, the exchange will still qualify.

As a caveat it should be mentioned that these identification rules are absolutely critical to any exchange. No deviation is possible and no extensions will be granted by the Internal Revenue Service.

Ironically, although only approximately three to five percent of exchanges are audited, the few exchanges which do fail upon audit, are usually because of discrepancies in identification.

If an investor errs on the three property rule, the 200% rule, and/or doesn't buy (virtually) everything he has identified, he has serious problems. Never indicate to an investor that methods exist to avoid these rules - they don't. They are interpreted strictly and no one has reason to create unnecessary legal exposure or liability.