The 45-day identification period is the first hard deadline in a deferred exchange, and it starts counting the moment the relinquished property closes, not when an exchanger feels ready to start looking. For an Indianapolis owner selling a rental duplex near Speedway or a small industrial building off Raymond Street, that clock runs through weekends, holidays, and any gap between finding a buyer and lining up a replacement. Understanding what the identification period actually requires, and which of the three counting rules governs a given exchange, is usually the difference between a deferral that holds up and one that quietly falls apart on a technicality.
What Counts as a Valid Identification
Identifying a replacement property is not a phone call to a broker or a mention in a text message. The identification has to be in writing, signed by the exchanger, and delivered to the qualified intermediary or another party involved in the exchange before midnight on day 45. The description has to be unambiguous, meaning a legal description or an exact street address, not a neighborhood or a general property type. An owner who tells their agent they are interested in an office building somewhere near Keystone at the Crossing has not identified anything; an owner who names 8925 North Meridian Street, suite number included, has.
The Three-Property Rule
Most exchangers use the three-property rule, which allows identification of up to three properties regardless of their combined value. This is the simplest path for someone who has a short list of genuine candidates, such as a warehouse near the airport, a second industrial building in Plainfield, and a retail strip in Greenwood, without needing to calculate a value ceiling. The tradeoff is that only three slots exist, so a list padded with unlikely long shots leaves less room for a realistic backup if the top choice falls through in diligence.
The 200 Percent Rule
The 200 percent rule removes the three-property cap but adds a value limit: an exchanger can identify any number of properties as long as their combined fair market value does not exceed 200 percent of the relinquished property's sale price. This rule suits an owner casting a wider net across several Indianapolis submarkets, perhaps evaluating five or six multifamily buildings between Fishers and Carmel, where the total value stays under the ceiling even though the property count is higher than three.
The 95 Percent Rule and Why It's Rarely Used
The 95 percent rule allows an exchanger to identify more properties than the 200 percent rule would permit, but only if they end up acquiring at least 95 percent of the total value identified. In practice this rule is unforgiving: naming ten properties and closing on only two, when the two represent less than 95 percent of everything listed, disqualifies the entire identification and the exchange fails. Most advisors steer clients toward the three-property or 200 percent rule instead, reserving the 95 percent rule for unusual situations where an exchanger genuinely intends to acquire nearly everything on the list.
Building a List That Survives a Deal Falling Through
The single most common reason an Indianapolis exchange loses its deferral is not a rule violation; it is a timeline problem where the only identified property falls out of contract with no backup named. A list built during the marketing period of the relinquished sale, before the 45 days even start, gives an exchanger the ability to confirm rather than scramble once the clock is running. A ranked list with a genuine second candidate, even a DST interest named as a documented fallback, protects the deferral if the top choice does not close.