Three-Property Rule

What it means

This is the default identification rule and the one used in the large majority of 1031 exchanges. The taxpayer writes down up to three candidate properties on the identification form, signs it, and delivers it to the QI by day 45. The combined value is irrelevant — a taxpayer who sold for $2M can identify three properties worth $10M each and only ultimately buy one.

Identifying fewer than three does not forfeit the ability to add more later (before day 45). After day 45, the list is frozen.

This rule is preferred because it preserves simplicity while providing backup options if the primary replacement falls out.