The most stressful part of a 1031 exchange is the ticking clock. From the moment you close the sale of your original property (the "relinquished property"), two clocks start ticking simultaneously. These are not separate windows of time; they run concurrently, meaning the 180-day period includes the 45-day period .

The 45-Day Identification Rule: The Search Phase

The first 45 days are often the most frantic. During this window, you must "identify" the property or properties you intend to buy. This isn't just a mental note; it must be a formal, written document signed by you and delivered to your Qualified Intermediary .

How to Identify Property Correctly

The IRS is specific about what constitutes a valid identification. You must provide an unambiguous description of the replacement property. For real estate, this usually means:

The full legal street address.
A legal description (such as a lot and block number).
For a property yet to be built, a detailed description of the improvements to be constructed.

If you are vague—for example, writing "an apartment building in downtown Chicago"—the IRS will likely disqualify the identification, and your exchange will fail.

The Three Identification Options

You aren't limited to identifying just one property. The IRS provides three specific "rules" or options for how many properties you can list on your 45-day letter :

The Three-Property Rule: This is the most common choice. You can identify up to three properties of any value. You can eventually buy one, two, or all three of them. This gives you "backups" in case your first choice falls through during inspections.
The 200% Rule: You can identify any number of properties, as long as their combined fair market value does not exceed 200% of the value of the property you sold. For example, if you sold a property for $1 million, you could identify five properties worth $400,000 each (totaling $2 million).
The 95% Rule: This is a rare and risky option. You can identify any number of properties of any value, but only if you actually end up buying at least 95% of the total value of everything you identified. This is usually only used in complex institutional deals.

The 180-Day Closing Rule: The Execution Phase

While you have 45 days to find the property, you have a total of 180 days from the original sale date to close on the purchase . This means the title must be in your name, and the QI must have transferred the funds to the seller of the replacement property.

The Concurrent Nature of Time

A common mistake beginners make is thinking they have 45 days to identify and then another 180 days to close. This is incorrect. You have 180 days total. If you take the full 45 days to identify a property, you have only 135 days left to finish the deal .

Case Study: Sarah’s Duplex Dilemma

Sarah sells a rental duplex on January 1st.

Day 0 (Jan 1): Sale closes. The $200,000 profit goes to her QI.
Day 45 (Feb 15): Sarah must have her identification letter in the QI's hands. She identifies three potential office buildings.
Day 180 (June 30): Sarah must have closed on at least one of those three office buildings.

If Sarah finds a perfect fourth building on Day 46, she cannot buy it as part of the exchange. If she identifies three buildings but the sellers of all three back out on Day 181, her exchange fails, and she must pay the taxes on her $200,000 profit.

What Happens if You Miss a Deadline?

There is no "oops" in a 1031 exchange. If you miss the 45-day window, the QI will typically return your money to you, but it will be treated as a standard sale. You will receive the cash, but you will also receive a tax bill for the capital gains and depreciation recapture .

The "Starker" Legacy

These rules exist because of a famous court case involving an investor named T.J. Starker. Before this case, the IRS insisted that exchanges had to happen simultaneously (you give me your deed, I give you mine at the same time). Starker argued that a delayed exchange should be allowed, and the courts agreed, leading to the 45/180 day rules we use today . This is why 1031 exchanges are sometimes called "Starker Exchanges."

Frequently Asked Questions: Timelines

Q: Can I change my mind during the 45 days?
A: Yes. You can revoke and submit new identifications as many times as you want until the 45th day. Once Day 46 hits, your list is locked.

Q: What if the property I identified is destroyed by a fire on Day 50?
A: Unless you identified other backup properties on your 45-day list, your exchange is likely over. This is why the "Three-Property Rule" is so vital—always have a Plan B and Plan C.

Q: Does the 180-day rule ever change?
A: The only exception is if your tax return due date for the year of the sale is earlier than the 180th day. In that case, you must file for an extension on your taxes to get the full 180 days.

Summary Table: The Identification Rules

Rule Name	Max Number of Properties	Max Total Value
3-Property Rule	3	Unlimited
200% Rule	Unlimited	200% of relinquished property's sale price
95% Rule	Unlimited	Must close on 95% of the total value identified