TWO HUNDRED PERCENT COVERAGE PLAN

The ceiling equals two hundred percent of the relinquished property's fair market value as of its transfer date, not its purchase price or tax basis. For a property that sold for four million dollars, the combined fair market value of every property named on the identification notice cannot exceed eight million dollars, regardless of how many properties are listed.

No. An investor must choose one identification method for a given notice. The three-property rule allows up to three properties with no value ceiling, while the two hundred percent rule allows unlimited properties subject to the combined value ceiling. Mixing the two approaches on a single notice is not a recognized identification method under the Treasury Regulations.

If the combined fair market value of all identified properties exceeds two hundred percent of the relinquished property's value, the identification generally fails to satisfy the safe harbor, which can jeopardize the exchange for every property named on the notice, not just the property causing the overage. This is why tracking a running valuation total before the notice is finalized is important rather than estimating informally.

The two hundred percent rule becomes useful when an investor wants to identify more than three candidates, commonly when comparing a portfolio of smaller properties collectively or hedging across several property types with uncertain individual availability. An investor comparing three or fewer candidates generally has no reason to use the two hundred percent rule, since the three-property rule imposes no value restriction for up to three properties.

There is no single mandated valuation source; fair market value is typically supported by purchase agreement pricing, broker opinions of value, or formal appraisals depending on how far along diligence is for each candidate. Because the ceiling calculation is only as reliable as the underlying valuations, candidates near the ceiling threshold generally warrant more rigorous valuation support than candidates well within the limit.