How to Write a Valid 45-Day Identification for a 1031 Exchange
A valid 45-day identification is a written list of your possible replacement properties, signed by you and delivered to the right party by midnight on day 45. Each property has to be described clearly enough that there's no question which one you mean, and the list has to fit within one of three identification rules.
Get any of those pieces wrong and the IRS can treat your identification as if you never made one, which ends the exchange. The good news is that every one of these requirements is in your control, and none of them is complicated once you know what to look for.
What is the 45-day identification period?
In a delayed 1031 exchange, you sell your relinquished property (the property you're giving up) first, then buy your replacement property (the property you're acquiring) later. Identification is the formal step where you tell us, in writing, which properties you might buy.
The identification period starts on the day your relinquished property closes and ends at midnight on day 45. Here's how the timing works:
Days are calendar days, including weekends and holidays.
If day 45 falls on a Saturday, Sunday or holiday, it does not roll to the next business day.
The 45-day and 180-day periods run at the same time, both starting from the closing of your relinquished property.
You have up to and including day 180 to complete your replacement purchase or purchases.
The exchange period ends at the earlier of day 180 or your tax return due date, including extensions. For a sale late in the year, talk with your CPA about extending your return so you keep the full 180 days.
If you sell more than one relinquished property in the same exchange, both periods run from the first sale.
You can find your exact dates with our 1031 Exchange Timeline Calculator. For a broader walk-through of the deadlines, see How Do Timelines Work in a 1031 Exchange?
One shortcut: any replacement property you actually close on within the 45 days counts as identified, even without a separate list.
What does a valid identification need to include?
Under the Treasury Regulations, a valid identification has four parts:
It's in writing. A phone call or a verbal conversation with your agent does not count.
It's signed by you, the taxpayer on the exchange.
It's delivered on time to the person obligated to transfer the replacement property to you, or to another party to the exchange who is not you or a "disqualified person." In practice, that means sending it to us as your Qualified Intermediary.
Each property is unambiguously described.
Pay attention to who receives it. Anyone who has acted as your attorney, accountant, real estate agent, broker or employee within the two years before your sale is generally a disqualified person. Sending your list only to your own agent or CPA can leave you without a valid identification.
What does "unambiguously described" mean?
For real estate, the regulations accept a legal description, a street address, or a distinguishable name (such as the name of a specific apartment building). The test is simple: could someone reading your list tell exactly which property you meant?
Examples that work:
"123 Elm Street, Riverside, CA 92501"
"456 Oak Avenue, Unit 12, Phoenix, AZ 85004"
The full legal description or parcel number from the title report
Examples that cause problems:
"A fourplex in Riverside"
"A unit at 456 Oak Avenue" when the building has 40 units
"Any property listed by my broker"
A few special cases:
Multiple parcels. If a property sits on more than one parcel, list each parcel number so nothing is left out.
Fractional interests. If you plan to buy a tenant-in-common share or a Delaware Statutory Trust interest, identify the specific offering by name and include the percentage or dollar amount you intend to acquire.
Property to be built or improved. Give the legal description of the land and as much detail about the planned construction as you practically can. These exchanges require special structuring and need to be set up before the replacement property is acquired.
What are the three identification rules?
Your list has to fit within one of these three rules.
The three-property rule
You can identify up to three properties of any value. This is the rule most investors use, because it's simple and leaves room for two backups.
The 200% rule
You can identify more than three properties, as long as their combined fair market value doesn't exceed 200% of the value of everything you sold. If you sold a property for $1,000,000, you could identify five properties worth a combined value of $2,000,000, but not five worth $2,100,000.
The 95% rule
If your list exceeds both limits above, it's still valid only if you acquire at least 95% of the total value of everything you identified by the end of the exchange period. In practice, that means buying nearly every property on the list, so this rule is rarely something to plan around.
If you go over the limits and don't meet the 95% rule, the regulations treat you as having identified nothing, except for property you already closed on within the 45 days.
Identifying a property doesn't obligate you to buy it. It does mean that, apart from property you closed on within the 45 days, you can only buy from your list.
Can you change or revoke your identification?
Yes, until midnight on day 45. A revocation has to be in a signed written document, delivered before the deadline to the same person who received your identification. Once a property is properly revoked, it's off your list, and you can identify a different one in its place.
After day 45, the list is locked. You can't add a property, even if every deal on your list falls apart.
What are the most common identification mistakes?
This situation unfortunately plays out more often than it should. These are the errors to watch for:
Waiting until the last few days to start looking at properties.
Identifying only one property with no backup.
Sending the list only to your own agent, attorney or CPA.
Using a vague description, like a neighborhood or a building without a unit number.
Identifying four or more properties without checking the 200% limit.
Assuming day 45 moves to Monday when it lands on a weekend.
For more on deadline pitfalls, read Is Your 1031 Exchange at Risk? 3 Timeline Mistakes to Avoid.
How we help with your identification
We set up your exchange, track your 45-day and 180-day deadlines, and receive your identification as your Qualified Intermediary. Choosing the properties is your decision, and questions about how your exchange will be taxed belong with your CPA.
If you have a sale coming up, connect us with your closing agent (escrow officer, title company or closing attorney) before your relinquished property closes. We can get most exchanges set up the same day.
APX 1031 is a Qualified Intermediary. We don't provide tax or legal advice; talk with your CPA or attorney about your situation.
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