The short answer
Substantially the same property is the standard your replacement must meet against what you identified: under Treasury Regulation section 1.1031(k)-1(d)(1)(ii), identified property counts as received in time only if what you receive is substantially the same property as identified. The regulation's examples ask whether the basic nature or character changed, and they accept a portion worth 75% of the identified property. A new description agreed after day 45 cannot fix a mismatch.
At a glance
| Test | No change in the property's basic nature or character |
|---|---|
| Portion bought | 75% of value accepted in the regulation's land example |
| Minor changes | A fence added to raw land did not matter |
| Construction | Usual production changes are ignored; substantial ones are not |
The test is basic nature or character, applied to each property separately
Paragraph (d)(1) of the regulation says identified property is received before the end of the exchange period only if you receive it in time and it is substantially the same property as identified. Where you named several properties, the test runs separately for each one.
The examples supply the standard. In Example 2 the owner of two acres of raw land puts up a fence after it was identified; the fence did not alter its basic nature or character as unimproved land, so the taxpayer received substantially the same property.
Example 3 goes the other way. The identified property is a barn on two acres worth $250,000, and the taxpayer buys only the barn and its underlying land for $187,500. That part differs in basic nature or character from the property as a whole, so it fails.
Worked example: 1.5 of 2 acres, 75% of the value, passes
In Example 4 the identified property is two acres of unimproved land worth $250,000. The taxpayer buys 1.5 acres for $187,500. The portion has the same character as the whole, and its value is 75% of the property as of the date of receipt, so the taxpayer received substantially the same property.
Set Examples 3 and 4 side by side: the same $187,500 out of $250,000 passes once and fails once. Character decides first and value second. The regulation sets no percentage floor; 75% is simply the figure in that example, so treat any smaller portion with caution and ask your CPA. If you expect to buy only part of a property, describe that part in the notice itself, for example by the legal description of the parcel, so the property received matches the property identified.
Where it bites: construction, carve-outs and changed descriptions
For property still to be built, paragraph (e)(3) ignores variations due to usual or typical production changes, but substantial changes mean the property is no longer substantially the same. Real property unfinished when you receive it is tested as if it had been completed, and only the real property received counts; see our answer on new construction as replacement property.
A description cannot be repaired later. In Example 3 of paragraph (c)(7), a notice naming "unimproved land located in Hood County with a fair market value not to exceed $100,000" was not unambiguous, and agreeing on a specific parcel after the deadline did not cure it. Get the identification notice right the first time; our answer on changing an identification after day 45 explains why.
Related questions
Is there a minimum percentage I must buy?
The regulation sets none. Its Example 4 accepts 75% of the identified land because the portion kept the same character, but that is an illustration, not a floor.
The seller made small repairs after I identified the property. Does it still count?
Changes that do not alter the basic nature or character are fine; the regulation's example of a fence on raw land passed. A change that turns the property into something different, such as splitting off the improvements, can fail.
What if the building I identified is unfinished at day 180?
Under paragraph (e)(3)(iii) it is tested as if construction had been completed by the day you receive it. Only the real property actually received counts, so work not yet in place at closing does not count. Our improvement exchange guide covers the structure.
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.