In this guide
- Why identification exists at all
- The writing: what day 45 actually requires
- Rule 1: the 3-property rule
- Rule 2: the 200% rule
- Rule 3: the 95% rule (the cure, not the plan)
- The three rules side by side
- Changing your mind before — and after — day 45
- Identification strategy: the backup slot
- The five identification mistakes that void exchanges
- Frequently asked questions
Why identification exists at all
Before 1984, the Starker litigation had blessed delayed exchanges with no outer limit — sell now, buy “like-kind” property years later. Congress responded with §1031(a)(3): replacement property must be identified within 45 days and received within 180, and the Treasury regulations turned “identified” into the precise machinery on this page. The policy logic: an exchange is supposed to be a continuation of investment, not an open-ended option on the market. The practical effect: the 45-day identification is where exchanges are actually won or lost — the timeline guide covers the clocks; this page covers what the writing itself must do.
The writing: what day 45 actually requires
Under Treas. Reg. §1.1031(k)-1(c), a valid identification is: (1) in writing, (2) signed by you, (3) delivered by midnight of day 45, (4) to a permitted person, (5) unambiguously describing the property. Each element has a trap. The permitted recipient is normally your qualified intermediary or the seller of the replacement property — not your own attorney, accountant, or broker; identifying to your own agent is identifying to yourself, which is nothing. “Unambiguous” means a street address or legal description for real property; for a DST interest, the trust's full name and the dollar amount or percentage interest. Email satisfies the writing at virtually every QI (their exchange agreement says how). And one clean shortcut: closing on the replacement within the 45 days is its own identification — no separate writing needed for property you actually acquired.
Keep proof. Timely delivery is your burden if examined years later, so a dated email to your QI with their confirmation beats a fax log, which beats memory. Careful QIs acknowledge receipt in writing; ask for it.
Rule 1: the 3-property rule
Identify up to three properties, of any value, and acquire any one or more of them. No price caps, no percentage math — a $500K sale can name three $5M candidates. This is the rule for the overwhelming majority of exchanges because it matches how people actually buy: a primary target, a fallback, and a safety. The count is properties named, not bought — naming three and closing one is the standard outcome. The only discipline it demands is choosing well, because those three slots are the entire universe you may purchase from after day 45.
Rule 2: the 200% rule
Need more than three candidates? Identify any number of properties, so long as their aggregate fair market value on day 45 doesn't exceed 200% of the relinquished property's sale price. Sell for $1,500,000 and you may name up to $3,000,000 of candidates — six $500K rentals, or five DST interests plus a building. This is the diversifier's rule, common when one large property is being split into several smaller ones. Its teeth: exceed the cap and the entire identification is void — not trimmed to the first $3M, void — leaving you with no valid identification at all unless the 95% rule rescues you. Because “fair market value” of unlisted candidates involves judgment, prudent practice under this rule leaves a cushion below the cap rather than engineering to 199.9%.
Rule 3: the 95% rule (the cure, not the plan)
The rule with the spectacular CPC and the narrow real-world use. If you identified more than three properties and their total value exceeds 200%, the identification survives anyway if you actually acquire at least 95% of the aggregate value of everything you identified. Read that carefully: it converts your candidate list into a commitment — identify $4M across five properties and you must close roughly all of them; one $400K deal falling through drops you below 95% and voids the identification retroactively, collapsing the whole exchange into a taxable sale. It exists as a cure for accidental over-identification and as a tool for portfolio-scale exchanges where every acquisition is locked and cross-contracted. As a strategy for an ordinary exchanger, it's the tightrope without the net; if you find yourself “planning to use the 95% rule,” the better plan is almost always trimming the list back under one of the first two rules before day 45.
The three rules side by side
| 3-property | 200% | 95% | |
|---|---|---|---|
| How many properties | Up to 3 | Unlimited | Unlimited |
| Value limit | None | ≤200% of sale price | None |
| Must you buy them? | Any one or more | Any one or more | ≥95% of total value named |
| Who uses it | Nearly everyone | Diversifiers, DST splitters | Over-identifiers (as a cure); portfolio deals |
| Failure mode | All 3 deals die → exchange fails | Blow the cap → identification void | Miss one closing → identification void |
One refinement worth knowing: incidental property (fixtures and items typically transferred with real estate, up to 15% of a property's value) doesn't count as separate property for these limits — relevant mostly to furnished and equipment-heavy deals.
Changing your mind before — and after — day 45
Until midnight of day 45, the list is fully editable: revoke any identification in a signed writing delivered to the same party, and identify replacements — as many times as you like. The revocation must be as formal as the identification; calling your QI doesn't un-name a property. After day 45, the machinery locks: no additions, no substitutions, no exceptions for deals that fell through, sellers who ghosted, or inspections that turned up horrors. You may only acquire what's on the frozen list, and if nothing on it closes by day 180, the funds come back taxable. This cliff is the entire argument for the next section.
Identification strategy: the backup slot
The practitioners' consensus, earned from decades of dead deals: never file an identification with empty slots. Under the 3-property rule that means three names, structured by role — the target (the deal you're in contract on), the fallback (a real alternative you'd genuinely accept), and the safety: something that can close fast and won't be bought out from under you. This is where DST interests earn their identification-slot reputation regardless of what you think of them as investments — a trust interest has no competing buyer, no financing contingency, and can close in days, which makes it the one candidate on your list whose availability on day 179 is nearly certain. Costing nothing to name, it converts the 45-day cliff into a soft landing; the into-a-DST guide covers what actually happens if you use it. Whatever your safety is, line up all three before you list the property — the search-before-selling advice in the timeline guide exists because 45 days is a brutal window in which to start from zero.
The five identification mistakes that void exchanges
From the case law and QI war stories, the recurring fatal errors: (1) identifying to the wrong person — your own attorney or agent, which the regulations treat as no identification; (2) ambiguous descriptions — “a condo in the Palms building” when the building has 300 units; (3) blowing the 200% cap while naming four-plus properties, voiding everything; (4) informal revocations — swapping candidates by phone and buying something not validly on the list; and (5) missing midnight — the deadline runs on calendar days with no weekend grace, per the 45/180-day rules. Every one is unforced, every one is fatal, and every one is prevented by the same habit: draft the identification with your QI in week one, not week six, and have them confirm form and receipt in writing.