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A
Acquisition Property
See Replacement Property.
B
Boot
Fair Market Value of non-qualified (not like-kind) property received in an exchange. (Examples: cash, notes, seller financing, furniture, supplies, reduction in debt obligations.)
Build-to-Suit
The build-to-suit exchange is a tax-deferred exchange in which improvements are made to the replacement property. Once the necessary improvements are completed (within the 180-day exchange time period), ownership is transferred to the Exchanger and the exchange transaction is completed. This exchange variation gives investors more flexibility, providing the opportunity to either improve an existing property or construct a new replacement property. Also known as a construction exchange or improvement exchange.
C
Construction Exchange
See Build-to-Suit.
Constructive Receipt
Control of proceeds by an Exchanger even though funds may not be directly in his possession.
D
Deferred Exchange
The deferred exchange is the typical 1031 exchange that most think about when discussing exchanges of real property. The tax-deferred exchange, as defined in Section 1031 of the Internal Revenue Code of 1986, as amended, offers real estate investors the opportunity to build wealth and save taxes. By completing an exchange, the investor (Exchanger) can dispose of his investment property, use all of the equity to acquire replacement investment property, defer the capital gain tax that would ordinarily be paid, and leverage all of the equity into the replacement property. Two requirements must be met to defer the capital gain tax: (a) the Exchanger must acquire like-kind replacement property, and (b) the Exchanger cannot receive cash or other benefits (unless the Exchanger pays capital gain taxes on this money). Also known as a delayed exchange or a Starker exchange.
Delayed Exchange
See Deferred Exchange.
Downleg Property
E
EATH (Exchange Accommodation Title Holder)
In a reverse exchange, the EATH takes and holds title to replacement property before the Exchanger finds a buyer for the relinquished property.
Exchange Party
The property owner(s) seeking to defer capital gain tax by utilizing a Section 1031 exchange. (The Internal Revenue Code uses the term Taxpayer.) Also known as the exchange party.
Synonyms: Exchanger
Exchange Property
Exchanger
See Exchange Party.
F
Forward Delayed Exchange
A type of exchange that occurs when a property is sold (relinquished property) and another property is purchased (replacement property) within 180 days following the sale of the relinquished property.
I
Identification Period
The first 45 days of the exchange period.
Improvement Exchange
See Build-to-Suit.
L
Like-kind Property
The nature or character of property (not its grade or quality). Generally, real property is like-kind as to all other real property as long as the Exchanger‘s intent is to hold the property as an investment or for productive use in a trade of business. With regard to personal property, the definition of like-kind is much more restrictive.
P
Personal Property Exchange
Q
Qualified Intermediary
The entity that facilitates the exchange for the Exchanger. Treasury Regulations use the term Qualified Intermediary; some companies use facilitator or accommodator.
R
Relinquished Property
The property ‘sold’ by the Exchanger. Also known as the exchange property or the downleg property.
Replacement Property
A term used to describe the property acquired by the Exchanger. Also known as the acquisition property or the upleg property.
Reverse Exchange
Type of exchange in which the replacement property is purchased before the sale of the relinquished property.
S
Simultaneous Exchange
Type of exchange in which the closing of the relinquished property and the replacement property occur on the same day, usually back-to-back. There is no time interval between the two closings.
Starker Exchange
See Deferred Exchange.
U
Upleg Property
See Replacement Property.