1031 Identification Letters: Advisor Template and Review Checklist

Identification Letter Template

Use this template for every 1031 exchange. Customize the fields and verify against source documents before submission.

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IDENTIFICATION OF REPLACEMENT PROPERTY IN 1031 EXCHANGE

Date: [Today's date]

Taxpayer: [Legal entity name, e.g., "ABC Investment LLC, a [State] limited liability company"]

Exchange Reference Number (if applicable): [QI exchange ID or transaction reference]

Qualified Intermediary: [QI name and address]

Relinquished Property: [Street address or legal description of sold property]

Date of Sale: [Closing date of relinquished property]

Instructions to Qualified Intermediary:

Pursuant to Treasury Regulation Section 1.1031(k)-1(c), the undersigned taxpayer identifies the following replacement property for the above-referenced 1031 exchange:

Replacement Property Identification:

Property 1:

• Address: [Street address]
• Legal Description: [Full legal description as it appears in the deed or purchase agreement]
• County and State: [Location]
• Expected Closing Date: [If known]

Property 2: [Repeat as needed]

Property 3: [Repeat as needed]

Certification:

I/We certify that the above property or properties are identified in good faith and with the intention to acquire them in exchange for the relinquished property. I/We understand that this identification is binding and that no changes may be made after midnight on [Day 45 date, Year].

Signature:

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[Taxpayer name and title, if entity]

Date: _____________________

Delivery Confirmation:

This identification was delivered to the Qualified Intermediary via [email/hand-delivery/fax] on [date] at [time].

Confirmation receipt: [receipt number or email confirmation]

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Advisor Review Checklist

Before the taxpayer submits the identification to the QI, verify each item.

• Property description is unambiguous (street address and legal description, not vague language)
• Property description matches the purchase agreement and preliminary title report exactly
• Taxpayer name matches the entity name on the exchange documents and tax return
• Identification is signed by a person authorized to sign for the entity
• Identification will be delivered to the QI (not to an attorney, accountant, or agent)
• Identification is being delivered before midnight on Day 45
• Number of properties identified complies with one of the three rules (3-property, 200%, or 95%)
• If multiple properties are identified, aggregate value complies with applicable limits
• Identification is on a dated document so the date of submission is clear
• The taxpayer understands they cannot change or add properties after Day 45
• The taxpayer understands they must close on an identified property (or 95% of identified value if the 95% rule applies)

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Legal Requirements for a Valid Identification

A valid identification must meet four criteria:

The Three Identification Rules

Only one rule governs a given exchange. If you identify three or fewer properties, the 3-property rule applies. If you identify four or more, the 200% or 95% rule applies based on aggregate value.

If a taxpayer identifies three properties and one falls through, the taxpayer cannot add a fourth property after Day 45.

How to Complete the Template

Entity Name: Use the exact legal name of the taxpayer entity. If it is an LLC, include the state of formation. If it is a corporation, include "Inc." or "Corp." Do not use an individual's trade name if they operate as an entity.

QI Information: Use the qualified intermediary's full name and the address to which the identification is being sent. Confirm the correct address before sending.

Relinquished Property Description: Use the exact address and legal description from the deed. Consistency with the sale closing documents is critical.

Replacement Property Description: Use the street address from the purchase agreement. Provide the full legal description. If the property is newly constructed, use the lot and block number from the recorded plat. Copy the legal description directly from the purchase agreement or preliminary title report. Do not paraphrase or rely on memory.

Expected Closing Date: Optional. If included, it serves as planning information. If the date changes, it does not invalidate the identification.

Signature: The taxpayer must sign. If the taxpayer is an entity, determine the proper signatory from the operating agreement or bylaws. If in doubt, include a board resolution or member approval authorizing the exchange and designating the signatory.

Delivery Confirmation: Record the method and date/time. Email delivery is recommended because it creates a time-stamped record. Request a confirmation from the QI within 24 hours.

Common Mistakes and Fixes

Multi-Property Identifications and the 95% Rule

When using the 95% rule with multiple properties:

• At identification (Day 45): aggregate value of identified properties must not exceed 95% of the relinquished property value
• At closing (Day 180): the taxpayer must actually close on properties totaling at least 95% of the identified value

This rule creates planning risk if the taxpayer is identifying properties speculatively or if market conditions change. Counsel taxpayers carefully on the closing obligation.

Delivery and Documentation

Email delivery is acceptable and recommended because it creates a time-stamped record. Use a subject line like "1031 Exchange - Identification of Replacement Property - [Taxpayer Name]."

Request a read receipt or confirmation from the QI. Preserve this confirmation. In an audit, proof of timely delivery is critical.

Best practice: have the QI issue a written confirmation of identification receipt within 24 hours. If the QI does not do this automatically, request it in writing.

Extension of the Identification Deadline

In limited circumstances, the identification deadline may be extended under Rev. Proc. 2005-14 (natural disaster, death of a key person, war). Extensions are rare and require a showing of extraordinary circumstances. Do not plan on an extension. Plan on the original deadline.

Bottom Line

The identification letter is the moment of truth. Draft it using this template, verify it against source documents, run through the review checklist, confirm delivery to the QI, and document the delivery time. Your attention to this detail is the difference between a successful exchange and a costly failure.