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First of all, characters with higher lore scores (like mages and bards) may identify items automatically. This will happen when you right click on the item. Failing that, the character trying to identify must either a) have an identify scroll in his possession, or b) have the identify spell (1st level mage spell) memorized. Then the options won't be grayed out. Note that even low level mages can have four or five level one spells, so you can select all identify spells, rest, identify items, and then reselect your normal spells (magic missile, etc.) and rest again.
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