The replacement property must be identified within 45 days of the transfer of the first relinquished property. (the "Identification Period"). This 45 day rule may not be extended even if the 45th day should happen to fall on a Saturday, Sunday or legal holiday.

The Replacement Property or Properties must be identified in a written document (the "Identification Notice") signed by the taxpayer and hand-delivered, mailed, telecopied, or otherwise sent and received before the end of the identification period. Written identification should be made to the party obligated to transfer the Replacement Property to the taxpayer, or any other person involved in the exchange other than the taxpayer or a disqualified person. Examples of persons involved in the exchange include any of the parties to the exchange, an intermediary, an escrow agent and a title company.

The acquisition of your replacement property must be completed by the earlier of 1) 180 days of the transfer of your first relinquished property or 2) the due date of filing your federal income tax return for the year in which you transferred the first relinquished property, including extensions. This 180 day rule may not be extended even if the 180th day should happen to fall on a Saturday, Sunday or legal holiday.

The rules are more restrictive for personal property exchanges than for real property exchanges. In addition to the other requirements for a proper identification, replacement personal property must be identified by a specific description of the particular type of property. For example, for tangible personal property, replacement property must be of a like kind or like class. Relinquished property and replacement property must be of the same General Asset Class or Product class as described in the North American Industry Classification System (NAICS). The NAICS Manual was updated in 2002. Copies of the NAICS Manual may be obtained from the National Technical Information Service of the Department of Commerce and may be accessed, with a more complete listing of manufactured products and manufacturing industries, on the internet at http://www.census.gov/naics.

In the case of intangible personal property, section 1031 applies only if the exchanged properties are "like kind." The rules are less clearly defined for intangible personal property and depends on the "nature or character" of the property rights involved and also consideration of the "nature or character" of the underlying property related to the intangible personal property.

When complying with the identification rules, you should unambiguously describe the particular type of property. The Regulations to Section 1031 provide that a truck is unambiguously described if it is described by a specific make, model, and year. Due to the nature and complexity of personal property exchanges, it is recommended that independent tax or legal advice be obtained prior to starting an exchange.

For additional information specifically related to personal property exchange transactions, please contact your local First American Exchange office.

First American Transportation Title Insurance Company may be able to provide title coverage and services for owners and lenders on aircraft and vessels. As with any type of investment property you will want to protect your ownership interest against any title problems that may occur from documentation errors, fraud or any unknown liens against the asset.

For additional information on First American Transportation Title Insurance Company and their products, please visit their web site at http://www.firstam.com/movables/main.html

All information contained herein is provided as a matter of courtesy to our clients. First American Exchange Company, its officers and agents make no representations as to the completeness and applicability of the information contained herein to each individual taxpayer. As a Qualified Intermediary, First American Exchange Company is precluded from providing tax or legal advice to its clients. Please consult your own independent tax or legal advisor regarding your specific circumstances.