45-Day Identification Period

The 45-day identification period is the first hard deadline in a 1031 exchange. Beginning on the day the relinquished property closes (the day after the transfer), the investor has exactly 45 calendar days, with no extensions for weekends or holidays, to identify potential replacement properties in a written, signed document delivered to the qualified intermediary. Identification must be unambiguous, typically by street address or legal description. Investors generally rely on one of two rules: the three-property rule, under which up to three properties may be identified regardless of value, or the 200% rule, under which any number of properties may be identified so long as their combined fair market value does not exceed 200% of the value of the relinquished property. A less common 95% exception allows identifying more property if the investor actually acquires at least 95% of the total value identified. Missing the 45-day deadline or failing to follow the identification rules causes the exchange to fail, making the entire deferred gain immediately taxable. Because the clock is so unforgiving, many investors pre-identify a Delaware Statutory Trust as a backup, since DST interests can usually be acquired quickly and in precise dollar amounts.