The 45 Day Identification Period

The forty five day identification period is the window an exchanger has, starting the day after the relinquished property closes, to formally name candidate replacement properties in writing. It is one of the two fixed deadlines that make a 1031 exchange fundamentally different from an ordinary property purchase, since there is no ability to simply wait for the right Los Angeles property to come along.

Forty five calendar days sounds like a reasonable amount of time until escrow paperwork, lender pre-qualification, and property tours are factored in; in practice, exchangers who start the property search only after the relinquished property closes often find themselves rushing to finalize a written identification in the final week of the period.

The identification must be a written document, signed by the exchanger, describing the candidate property unambiguously, generally by legal description or a specific street address, and delivered to the qualified intermediary or another party to the exchange agreement before midnight on day forty five. A verbal conversation with an agent, no matter how specific, does not meet this standard.

The most effective way to manage the forty five day period is to begin building a candidate list of Los Angeles properties before the relinquished property even closes, so that by the time the clock starts, the exchanger is refining an existing shortlist rather than starting the search from zero.

Once day forty five passes, the identified list is locked; no new properties can be added, though the exchanger can still choose to close on fewer than all the identified properties, or on none of them if the exchange is abandoned, understanding that abandoning the exchange after this point still means the deferred gain becomes taxable.

A frequent misconception is that the forty five days only count business days, which leads some first-time Los Angeles exchangers to believe they have more time than they actually do; because the count includes weekends and holidays without exception, we confirm the exact calendar date of the deadline in writing rather than leaving it as an approximate number of weeks.

Even an exchanger who already has a strong preferred Los Angeles replacement property in mind sometimes benefits from using the available time to identify one or two backups under the three property rule, since due diligence occasionally surfaces an issue with even a well-regarded candidate property that was not apparent during the initial search.