Identification is a specific, formal act, distinct from any conversation with a broker about candidates. It has to be in writing, signed, and delivered to the qualified intermediary or another party to the transaction before midnight on the 45th day after the relinquished property closes, and it has to describe the property clearly enough that there is no dispute about which property was named.
What Counts as an Unambiguous Description
A street address or a legal description is sufficient for real property. A general description, such as "a multifamily property in Seattle," is not, because it does not identify a specific asset. For a property still under construction or not yet subdivided, the description needs to be as specific as the facts allow, including plans or a legal description of the parcel. Sloppy identification language is a common and entirely avoidable way to lose an exchange that otherwise would have worked. When a property has more than one commonly used name, such as a building known informally by a prior owner's name, the identification should still lead with the address or legal description rather than relying on whichever name the investor happens to be most familiar with.
The Three Ways to Structure a Written Identification
Federal rules give investors three options for how many properties can appear on the identification, and each option has a hard limit attached.
- The three-property rule: identify up to three properties regardless of their combined value
- The 200% rule: identify more than three properties as long as their combined fair market value does not exceed 200% of the relinquished property's value
- The 95% rule: if the 200% threshold is exceeded, the investor must actually acquire at least 95% of the total value identified, or the entire identification can fail
Most Washington investors use the three-property rule because it is simplest to track, but the 200% rule is useful when spreading proceeds across several smaller properties or a mix of direct property and passive interests such as DST positions.
Revising an Identification Before the Deadline
An investor can revoke or revise a written identification any number of times before the 45-day deadline passes, as long as the revision is also in writing and delivered to the same party that received the original. Once the 45th day passes, the identification is locked, which is why it is worth naming a realistic backup property rather than using every available slot on aspirational candidates that are unlikely to close. Each revision should replace the prior version cleanly, with a clear date stamp showing when it was delivered, so there is no ambiguity later about which version of the identification actually governed the exchange.
Matching the Identification to the Investor's Actual Position
A useful identification reflects what the investor's sale proceeds, remaining debt target, and management capacity can actually support, rather than whatever looked appealing during a broker tour. Properties named on the list should already have enough documentation behind them, including price, financing feasibility, and basic title status, that acquiring them within the 180-day exchange period is realistic rather than aspirational.
Identification Mistakes That Surface After the 45-Day Deadline
Several identification errors are technically simple but only become visible once it is too late to fix them. Naming a property by its marketing name rather than its legal description or street address can leave the description ambiguous if two nearby parcels share a similar name. Identifying a property still owned by an entity related to the investor, without addressing how that relationship affects the transaction, can raise questions the qualified intermediary should have flagged before the notice was delivered. Listing a DST interest without confirming which specific trust and offering is intended, rather than a general category of investment, can also leave the identification open to challenge. None of these mistakes are difficult to avoid, but each one requires the identification to be reviewed for precision before it is delivered, not corrected afterward, since revisions are only possible before the 45-day deadline passes and are not possible at all once it does.
Common 1031 Exchange Questions
Does a verbal conversation with a broker count as identifying a property?
No. Identification has to be a written, signed document delivered to the qualified intermediary or another party to the exchange before the 45-day deadline. A verbal discussion, even a detailed one, does not satisfy the requirement.
Can an investor change the identified properties after submitting the list?
Yes, as long as the change is made in writing and delivered before the 45th day passes. After that deadline, the identification is final and cannot be amended.
What happens if the combined value of identified properties exceeds 200% of the relinquished property's value?
The investor falls under the 95% rule, which requires acquiring at least 95% of the total identified value. Falling short of that threshold can cause the identification, and potentially the exchange, to fail.
Does identifying a DST interest use one of the three identification slots?
Yes. A Delaware statutory trust interest is treated as identified property the same as a directly owned property, so it counts toward the three-property limit or the 200% calculation.
What happens if no property is identified by day 45?
The exchange fails for lack of a timely identification, and the transaction is treated as a taxable sale rather than a 1031 exchange, regardless of what happens after that date.