GENERAL “RULE OF THUMB” To avoid paying any capital gain taxes in an exchange, the investor should always attempt to: 1) Purchase property of equal or greater value (sales price). 2) Reinvest all of the net equity in replacement property. 3) Obtain equal or greater debt on replacement property to that which was paid off. * *Exception: A reduction in debt can be offset with additional cash from exchanger, but increasing debt cannot offset a reduction in exchange equity. Any cash to the exchanger will be taxable.*

SAME TAXPAYER REQUIREMENT The same taxpayers or entity that owned the Relinquished Property must take title to the Replacement Property. A good rule of thumb is to think of the taxpayer identification number or TIN (whether a social security number or a federal tax identification number). The same TIN entity must report the disposition of the Relinquished Property and the acquisition of the Replacement Property and report it as one exchange transaction on the tax return. For example; if only one spouse owns the Relinquished Property, only that one spouse should take title to the Replacement Property. However, the second spouse may be added to the deed of the Replacement Property after the exchange is completed.

DELAYED EXCHANGE DEADLINES Identification Period: Within 45 days of the transfer(sale) of the first Relinquished Property, the client must identify in writing the Replacement Property to be acquired by the end of the Exchange Period. Exchange Period: The client must receive (settle on) the Replacement Property within the earlier of 180 days after the date on which the client transferred the first Relinquished Property, or the due date (including extensions) for the client's tax return for the tax year in which the transfer of the first Relinquished Property occurs. IDENTIFICATION REQUIREMENTS The client has the flexibility of identifying more than one property, as Replacement Property, for their exchange. The options for identification are: Three Property Rule: The client may identify as potential Replacement Property any three properties, without regard to their fair market value. 200% Rule: The client may identify as potential Replacement Property any number of properties provided the aggregate fair market value of all of the identified properties does not exceed 200% of the aggregate fair market value as of the date of the transfer of all of the Relinquished Properties. 95% Exception: If the client identifies more potential Replacement Properties than allowed under either the Three Property or the 200% Rules, the client must receive Replacement Property by the end of the Exchange Period that has a fair market value of at least 95% of the aggregate fair market value of all of the identified Replacement Properties. NOTE: Patterson Osborn Exchange Services, LLC does not provide advice regarding specific tax consequences. Investors considering a 1031 tax-deferred exchange should seek professional advice from their accountant and/or tax attorney.