THE 45TH DAY FOLLOWING THE TRANSFER OF YOUR RELINQUISHED PROPERTY IS THE DEADLINE FOR IDENTIFYING REPLACEMENT PROPERTY. NO EXTENSION IS ALLOWED IF THE 45TH DAY HAPPENS TO FALL ON A SATURDAY, SUNDAY, OR LEGAL HOLIDAY. THIS DATE IS EXTREMELY IMPORTANT.

Under Regulations issued by the Internal Revenue Service for section 1031 tax-deferred exchanges, there are STRINGENT requirements regarding the identification of the Replacement Property.

Identification of all Replacement Property must be made in writing, must be signed by all persons who are named as Exchangors (for example, both spouses), and must be delivered to THE LONE STAR EXCHANGE COMPANY on or before the 45th day. You may not identify Replacement Property after the 45th day.

After you have selected your Replacement Property, then you should identify it by a letter to THE LONE STAR EXCHANGE COMPANY which describes the Replacement property, and which states that you identify this property as your Replacement Property. SIGN THE LETTER, AND SEND IT BY CERTIFIED FIRST CLASS MAIL "RETURN RECEIPT REQUESTED" AND BY FACSIMILE (830) 625-1031, SO THAT IT REACHES US BEFORE THE CLOSE OF BUSINESS ON THE 45TH DAY. If the 45th day is a Saturday, Sunday, or legal holiday, then we must receive your identification letter on the last business day PRIOR to the 45th day.

Real Property - If your Replacement Property is real property, then you should describe it by legal description and street address.

If your Relinquished Property is real property, then you may identify any type of real property as Replacement Property - single family rental, duplex, apartment building, hotel, office building, warehouse, commercial building, vacant land, etc. to be held for productive use in trade/business or for investment. You may identify property in any state within the United States or the District of Columbia.

Personal Property - If your Replacement Property is personal property, then you should describe it by a specific description of the particular type of property. For example, a truck generally should be described by a specific make, model, and year.

Property to be Improved or Constructed - If your Replacement Property is to be improved, produced, or constructed, then you must identify the improvements. For example, if the Replacement Property consists of improved real property where the improvements are to be constructed by the Intermediary. Then the description of the Replacement Property must include the legal description, street address of the underlying land, and as much detail regarding construction of the improvements as is practical at the time the identification is made.

You may identify as many as three properties, regardless of their total value (the "3-property rule"), OR you may identify any number of properties, provided that the aggregate fair market value on the 45th day does not exceed 200% of the aggregate fair market value of all your Relinquished Property on the date of its transfer (the "200% rule"). There are serious adverse consequences if you do not stay within either of these two rules.

If you stay within these rules, then it is not required that you acquire all of the property which you identify. We recommend that you identify more properties than you plan to purchase, so that if the closing on your preferred property should fail for any reason, then you will have made a timely identification of one or two alternate properties which may be acquired instead.

Property that is incidental to a larger item of property is not treated as property that is separate from the larger item of property. Therefore, you are not required to describe the incidental property. Property is incidental to a larger item if: 1) in standard commercial transactions, the property is typically transferred together with the larger item of property; and 2) the aggregate fair market value of all of the incidental property does not exceed 15% of the aggregate fair market value of the larger item of property.

For example, furniture, equipment, and other miscellaneous items of personal property will not be treated as separate property from an apartment building with a fair market value of $1,000,000 if the aggregate fair market value of the furniture does not exceed $150,000. In this example, the Replacement Property should be described with the legal description and street address of the apartment building, with no reference to the furniture, equipment, and other personal property.

You may revoke your identification and change your identification at any time before the end of the 45-day identification period.

An identification of Replacement Property is revoked only if the revocation is made in a written document which you have signed and which is hand delivered, mailed, or sent by facsimile to THE LONE STAR EXCHANGE COMPANY before the end of the 45-day identification period.