The short answer
Replacement property is the real property you receive in a like-kind exchange, to be held for productive use in a trade or business or for investment, as defined in Reg. section 1.1031(k)-1(a). In a delayed exchange it must be identified in writing by midnight on day 45 and received by the end of the exchange period, and what you receive must be substantially the same property you identified. Property that misses either test is treated as not like kind, so the sale becomes taxable.
At a glance
| Identification | Signed, written and unambiguous, delivered by midnight on day 45 |
|---|---|
| How many | Three of any value, any number within 200% of the value sold, or 95% actually acquired |
| Receipt | By the earlier of day 180 or the return due date, including extensions |
| Substantially the same | Same basic nature; a lot can be bought in part if it is 75% of the value, per the regulation's example |
The term is defined in the deferred exchange regulations, with identification and receipt tests attached
Reg. section 1.1031(k)-1(c) requires a written document signed by you, sent before the end of the identification period to the person obligated to transfer the property or to another party to the exchange who is not a disqualified person. Real property is described by legal description, street address or distinguishable name.
You may identify three properties of any value, or any number whose combined value does not exceed 200% of the relinquished property's value. Exceed both and the identification fails unless you acquire at least 95% of the value identified. You may revoke an identification in a signed writing before day 45; see how to identify replacement property.
Property you actually receive before day 45 counts as identified. Everything identified must then be received by the end of the exchange period under section 1031(a)(3).
Worked example: the regulation's land and barn cases show what substantially the same means
Reg. section 1.1031(k)-1(d) requires the property received to be substantially the same as the property identified, and its examples draw the line. Two acres of unimproved land on which the owner later builds a fence is still substantially the same, because the fence does not change its basic nature as unimproved land.
Two acres with a barn, identified at $250,000, is different. Buying only the barn and the land under it for $187,500 is not substantially the same, because a barn parcel differs in nature from the whole. But buying 1.5 of 2 identified unimproved acres for $187,500, 75% of the value, is substantially the same.
Property to be built can be identified too: give a legal description of the land and as much detail about the construction as is practicable; see new construction as replacement.
Where it bites: relatives, property you already own, and personal property in the deal
Buying replacement property from a related party that is cashing out is generally not reported as an exchange under the Form 8824 instructions; see buying replacement property from a relative.
Property you already own cannot be your replacement. Rev. Proc. 2004-51 denies the reverse exchange safe harbor for replacement property you owned within 180 days before it went to an accommodation titleholder; see an exchange into property already bought.
Furniture or equipment acquired with the building is not like kind. If it is incidental, worth no more than 15% of the real property, it does not upset the intermediary safe harbor, but it is still taxed as boot.
Related questions
How many replacement properties can I identify?
Three of any value, or more if their combined value stays within 200% of what you sold. Beyond that, the identification holds only if you acquire 95% of the value identified; see how many properties to identify.
What if an identified property falls through after day 45?
You cannot add a substitute after day 45, so any backup has to be on the original list; see when an identified property falls through.
Can a DST interest be replacement property?
Yes, when the trust is structured so investors are treated as owning its real estate; see DST like-kind qualification.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.