When you sell an investment property and want to defer the tax with a 1031 exchange, the IRS gives you a hard window to name your replacement property: 45 calendar days. Miss it, or do it wrong, and the entire exchange collapses — the full gain becomes taxable in that year. This guide walks you through the identification step exactly, so the form you send your Qualified Intermediary is valid the first time.
The two deadlines you're working against
Every delayed 1031 exchange runs on two clocks, both starting the day your relinquished (sold) property transfers — usually your closing date:
| Deadline | What it means |
|---|---|
| Day 45 Identification Period | You must identify your replacement property(ies) in writing, signed, and delivered to your Qualified Intermediary before midnight of the 45th calendar day. |
| Day 180 Exchange Period | You must close on the replacement property within 180 calendar days — or by your tax-return due date (including extensions), whichever comes first. |
Count from Day 0 (transfer date). Property you actually close on within the 45 days is treated as identified automatically — but it still counts toward the rules below, so list it anyway.
The three identification rules — pick one
The IRS lets you identify replacement property under one of three rules (Treas. Reg. §1.1031(k)-1(c)(4)). You use one rule per exchange.
1. The 3-Property Rule
Identify up to three properties, at any value. You must ultimately close on at least one. This is the rule most exchangers use because it's the simplest and hardest to get wrong.
2. The 200% Rule
Identify any number of properties, as long as their combined fair-market value is 200% or less of what you sold. Sold a $2M property? You can identify as many replacements as you like, up to $4M total. Useful when assembling several smaller properties.
3. The 95% Exception
Identify any number of properties at any total value — but you must actually acquire at least 95% of the total value you identified. Miss 95% and the whole exchange fails. It's high-risk and rarely used; treat it as a last resort, not a strategy.
What makes an identification valid
A valid identification has four requirements. Get any one wrong and the notice can be disqualified:
- In writing and signed. A written Identification Notice, signed by you (the exchanger), before the Day 45 deadline.
- Delivered to the right person. To your Qualified Intermediary (or another party to the exchange who isn't disqualified). Your attorney, CPA, real-estate agent, and relatives are all disqualified parties — sending the notice to them does not count.
- Described unambiguously. Full street address or legal description. For a unit in a multi-unit building, include the unit number.
- Percentage stated, if partial. If you're acquiring less than 100% of a property — a fractional or co-ownership interest — state the exact percentage or dollar amount in the notice. Leaving it off signals you're identifying 100%, which can invalidate the identification if you acquire something smaller.
You can revoke and re-identify as many times as you want before Day 45, in writing, delivered to the same recipient. Once Day 45 passes, the list is locked — no additions, no substitutions.
Identifying a partial or fractional interest
You don't have to identify a whole property. Many exchangers take a fractional interest — a percentage of a larger property held with other owners. When you do, the identification has to say so, precisely.
- State the exact share. Write the specific percentage (e.g., “a 25% undivided interest in…”) or the exact dollar amount you intend to acquire — not just the property address.
- Silence means 100%. If you describe the property without a percentage, the IRS reads it as identifying the entire property. If you then acquire only a slice, what you bought doesn't match what you identified — and the exchange can fail.
- Fractional value still counts toward the rules. Under the 200% Rule, count the value of the share you're identifying against your 200% ceiling — but see the debt point below, because leverage is counted too.
The template below has a dedicated “% acquiring” field beside each property for exactly this reason — fill it in any time you're taking less than the whole.
Don't forget the debt — you must replace equity and loan
This is the trap that costs people the most, and almost no guide spells it out. To fully defer your tax, you have to replace two things, not one:
The two-part replacement requirement
- Equity: reinvest all of your net sale proceeds into the replacement property.
- Debt: take on replacement property of equal or greater value — which usually means taking on at least as much debt as you paid off on the property you sold (or adding cash to make up the difference).
Here's why it bites: say you sold a property for $1,000,000 that had a $400,000 mortgage, netting $600,000 in equity. If you buy a $600,000 replacement free and clear, you reinvested all your cash — but you dropped $400,000 of debt. The IRS treats that shed debt as “boot,” and it's taxable. To fully defer, your replacement generally needs to be worth $1,000,000 or more, with the $400,000 of debt replaced by new financing or made up with additional cash.
The short version: trade up, or trade even — never trade down, on either value or debt. Any shortfall on either side is taxable boot.
How to complete the identification notice — field by field
Using the fillable template below, here's what goes in each field:
- Exchanger / taxpayer name — the exact name on title of the relinquished property.
- Relinquished property — the address of the property you sold.
- Date transferred (Day 0) — your closing/transfer date. Then count 45 and 180 calendar days forward and fill those deadlines in.
- Qualified Intermediary — the QI holding your exchange funds; this is who you deliver the notice to.
- Identification rule — check the one rule you're using.
- Replacement properties — the unambiguous description of each, plus the % acquiring if you're taking a partial/fractional interest.
- Value check (do this before you sign) — confirm each identified property lets you replace both your equity and your debt, and that your 200%-rule math uses full value including financing.
- Signature and date — sign and date before delivering, on or before Day 45.
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Common 45-day identification mistakes
- Sending it to a disqualified party. Emailing the list to your CPA or agent instead of the QI. It doesn't count.
- Vague descriptions. "A duplex in Austin" won't hold up. Use the full address or legal description.
- Blowing the 200% rule with leverage. The 200% test uses the full property value, including debt — not just your cash or equity.
- Counting on weekends. Day 45 is Day 45, holiday or not. Build in buffer.
- Forgetting the percentage. Taking a partial interest without stating the percentage can invalidate the identification.
1031 45-day identification: FAQ
What happens if I miss the 45-day deadline?
The exchange is disqualified. The full gain on your sale becomes taxable that year — capital gains, depreciation recapture, net investment income tax, and state tax. There is no standard extension except a federally declared disaster.
Can I identify more than three properties?
Yes — using the 200% Rule (total value ≤ 200% of what you sold) or the 95% Exception (you must acquire ≥ 95% of the identified value). The 3-Property Rule caps you at three but with no value limit.
Who do I send the identification to?
Your Qualified Intermediary, in almost all cases. Your attorney, CPA, real-estate agent, and relatives are disqualified parties and cannot receive a valid identification.
Can I change my identification after I send it?
Yes, but only before midnight of Day 45. Submit a signed written revocation or a superseding notice to the same recipient. After Day 45, the list is final.
Does the 45th day get extended for weekends or holidays?
No. The IRS counts calendar days. The only extension is a federally declared disaster under Rev. Proc. 2018-58.
How do I identify a fractional or partial interest?
State the exact percentage or dollar amount you're acquiring (e.g., "a 25% interest in..."), not just the address. If you omit the percentage, the IRS treats it as identifying 100% of the property, and acquiring a smaller share can invalidate the identification.
Do I have to replace the debt on my property?
To fully defer tax, yes. You must reinvest all your equity and acquire replacement property of equal or greater value, which generally means replacing at least as much debt as you paid off (or adding cash to cover it). Debt you shed is taxable "boot." The 200% rule also counts full property value including financing, not just equity.
Sources
IRS, Like-Kind Exchanges – Real Estate Tax Tips · IRC §1031 · Treas. Reg. §1.1031(k)-1(c) (identification rules) · Rev. Proc. 2018-58 (disaster extensions). This article is educational and does not constitute tax or legal advice. 1031 rules are strict and fact-specific — confirm every detail with your Qualified Intermediary and tax advisor before relying on it.