The 45-Day Identification Period

Identification is a written, signed document that describes the replacement property specifically enough to remove any ambiguity, typically an address or a legal description, delivered to the qualified intermediary or another party the IRS treats as qualified to receive it before day 45. A phone call to a broker, a signed letter of intent that never reaches the QI, or a property the investor merely toured does not satisfy the requirement. The IRS gives no credit for intent, only for the document actually delivered on time.

Most exchanges use the three-property rule, which lets an investor identify up to three replacement candidates of any value with no further restriction. This is the default choice for a straightforward Memphis exchange, such as a seller trading one industrial building near the airport submarket for a shortlist of three comparable properties across Shelby and DeSoto counties. The rule works cleanly as long as the investor genuinely intends to close on one of the three, rather than padding the list with candidates that were never realistic.

An investor who wants to identify more than three properties needs one of two alternate rules. The 200 percent rule allows any number of candidates as long as their combined fair market value does not exceed twice the value of the relinquished property, which suits a seller spreading proceeds across several smaller replacement assets, such as multiple retail pads or a mix of self-storage and flex space. The 95 percent rule removes the value cap entirely but requires the investor to actually acquire 95 percent of the total value identified, a standard that is difficult to satisfy in practice and mostly used when a large, uncertain pool of candidates is unavoidable.

Weekends and holidays count toward the 45 days the same as business days, so a relinquished property that closes on a Thursday effectively hands the investor a shorter working window than the calendar suggests. Investors who wait until the sale is under contract to start touring replacement candidates often discover that lender feedback, rent roll review, and seller negotiation eat most of the 45 days before a written identification is even drafted. A workable timeline treats the first two weeks as shortlist-building, the middle stretch as diligence and lender conversation, and only the final days as drafting and delivery, not as the moment the search actually begins.

A meaningful share of Memphis-area exchange activity looks across the state line into DeSoto County, Mississippi, where industrial and retail product near Southaven, Olive Branch, and Horn Lake can offer pricing or availability that Shelby County does not. Crossing that line inside a 45-day window is workable, but it adds a Mississippi title company, a different closing process, and sometimes a different lender relationship into a search that was already time-limited. An investor comparing a Cordova warehouse against a comparable building in Olive Branch should get preliminary title and lender feedback on both before committing scarce identification days to either one, rather than discovering the added friction only after the shortlist is already locked. The same logic applies to candidates in Crittenden County, Arkansas, across the river from downtown Memphis, where a third state's closing conventions can add its own small delays if they are not scoped early.