Rules & Deadlines
The 45-Day Rule Is Stricter Than Most People Realise
It is not a soft deadline, there is no extension for a weekend, and an email to your agent does not count as identification.
Illustration generated for this article by 1031 Exchange News Today.
Of the two deadlines in a 1031 exchange, the 45-day identification period is the one that ends more exchanges. Not because it is short, though it is, but because investors misunderstand what identification means and discover on day 46 that they never did it.
What the clock actually is
Forty-five calendar days from the closing of your relinquished property. Not from contract, not from listing, not from when the wire lands. From closing.
There is no extension for a weekend, no extension for a holiday, and no extension for a title company that took a week to record. The IRS has granted extensions only under formally declared federal disaster relief, and those are published notices covering whole regions.
What counts as identification
A signed written document, delivered to your qualified intermediary, describing the property unambiguously.
Each of those words is doing work. A phone call is not identification. An email to your agent is not identification, because your agent is not the intermediary. A shortlist you are still narrowing is not identification, because it is not unambiguous. And for real property, unambiguous generally means a street address or legal description.
The three identification rules
You may use whichever suits, but you must satisfy one of them completely.
| Rule | How many | The constraint |
|---|---|---|
| Three-property rule | Up to 3 | Any value at all. The one nearly everybody uses. |
| 200% rule | Unlimited | Combined fair market value must not exceed 200% of what you sold. |
| 95% rule | Unlimited | You must actually acquire 95% of the total value identified. |
The 95% rule is a trap dressed as flexibility. Identify ten properties and fail to close on one of the larger ones, and you fall below 95%, and the entire exchange fails rather than partially.
What you can still change after day 45
You may revoke and re-identify as many times as you like, but only up to midnight on day 45. Revocation has to be in writing and delivered the same way. After that the list is fixed, and if none of the identified properties closes, the exchange fails.
How to not lose on this deadline
- Start looking before your sale closes, not after. The 45 days are for identifying, not for beginning the search.
- Identify three, not one. The three-property rule costs nothing to use fully.
- Send the notice to the intermediary in writing and get an acknowledgement back.
- Do not identify property you have not seen or cannot realistically close on.
- Diarise day 45 the day your sale closes, and diarise day 30 as the real deadline.
Disclosure
This article is published by Easy1031, a qualified intermediary with a commercial interest in readers starting an exchange. The rules and mechanics described here are the same whichever intermediary you use. Nothing here is tax or legal advice.
