The clock on a 1031 exchange starts the day the relinquished property closes, not the day the seller decides to exchange or the day a qualified intermediary is engaged. From that closing date, an investor has exactly 45 calendar days to put replacement property in writing and deliver that identification to the qualified intermediary. Weekends and holidays count. There is no extension for a slow closing attorney, a property that fell out of contract, or an investor who simply needed more time to look at options in Providence, Warwick, or the coastal submarkets. The rule is mechanical, and the IRS applies it that way.
What trips up first-time exchangers is not usually the deadline itself, it's the identification rules that govern how many properties can go on that list and what happens when the list gets padded past what the rules allow. Those rules exist to prevent an investor from naming every property they might conceivably want and sorting it out later.
What Counts as a Valid Identification
An identification has to be unambiguous and in writing, delivered to the qualified intermediary, the seller of the replacement property, or another party involved in the exchange who is not a disqualified person, such as the investor's own agent or family member. A street address or a legal description is enough for real property. A verbal mention to a broker, a property saved in a browser tab, or a letter of intent that was never sent to the QI does not satisfy the requirement, no matter how clearly the investor intended to buy that property.
The description also has to be specific enough to identify one parcel, not a category. Naming a size range of industrial buildings along the I-95 corridor without pinning down actual parcels does not meet the standard, even if the eventual purchase falls within that description.
The Three-Property Rule
Most exchanges use the three-property rule, which allows an investor to identify up to three replacement properties regardless of their combined value. This is the simplest path for someone comparing, for example, a multifamily building in Cranston against a retail property near Newport and a third option held in reserve. As long as the final purchase comes from that list of three, the value of each individual property doesn't matter for identification purposes.
The limitation is obvious once stated: no more than three properties can appear on the list under this rule. A fourth candidate has to either replace one of the first three before the 45 days expire or get identified under a different rule entirely.
The 200% Rule
When an investor wants to identify more than three properties, the 200% rule takes over. It allows any number of properties to be named as long as their combined fair market value does not exceed 200% of the value of the property that was sold. An investor exchanging out of a property worth $1,000,000 could identify five smaller properties under this rule as long as their combined value stays at or under $2,000,000. Exceed that ceiling by even a modest amount and the entire identification can fail, not just the properties over the line, which makes this rule less forgiving than it looks at first glance.
The 95% Rule, and Why Few Exchangers Use It
The 95% rule permits identifying an unlimited number of properties with no value cap, but only if the investor actually acquires at least 95% of the total value of everything identified. In practice this rule is a trap for anyone who doesn't intend to buy nearly everything on the list, because falling short of that 95% threshold voids the identification entirely, even for properties that did close. It exists mainly as a narrow option for investors with a specific, near-certain acquisition plan across several parcels, not as a general substitute for the three-property or 200% rules.
Common 1031 Exchange Questions
When exactly does the 45-day clock start?
It starts on the closing date of the relinquished property, the day title actually transfers, not the day the exchange agreement was signed or the qualified intermediary was engaged.
Can you identify a property you're not sure you'll actually buy?
Yes, under the three-property or 200% rules the identified properties do not all have to close. The final purchase just has to come from the identified list, made in writing within the 45-day window.
What happens if you miss the 45-day deadline?
The exchange fails. The qualified intermediary is required to return the proceeds after the identification period lapses without a valid identification, and the sale is treated as a normal taxable transaction.
Can you change your identified properties after submitting the list?
Only within the 45-day window itself. A revised identification delivered before day 45 replaces the earlier one, but nothing can be added or swapped once the period ends.
Does identifying a property to your broker instead of the QI count?
No. A valid identification has to be delivered in writing to the qualified intermediary or another eligible party in the transaction, not just discussed with a real estate agent or written down privately.
Do the 200% and 95% rules apply to the same exchange at the same time?
No, an investor picks one rule for a given exchange based on how many properties they want to name and how confident they are in closing most or all of them.
