1031 Exchange Glossary
1031 exchange
A transaction that allows one to reinvest the proceeds from the sale of real estate property held for investment or business purposes (relinquished property) to another like property (replacement property) and defer capital gains tax that would otherwise be due on the first sale. Also called a tax-deferred exchange.
Boot
Real estate property or proceeds which the taxpayer receives in the 1031 exchange that does not qualify as "like kind" property. Boot is subject to taxes.
Build-to-suit 1031 exchange
A 1031 exchange where the Qualified Intermediary or EAT holds the title to the replacement property on behalf of the property seller, and during which time improvements are made to the replacement property. Also known as an Improvement exchange.
Concurrent 1031 exchange
A 1031 exchange where the sale of the relinquished property and the purchase of the replacement property takes place simulataneously.
Deferred, Delayed exchange
A 1031 exchange where the purchase of the replacement property can take place up to 180 days from the sale of the relinquished property. Also called a Starker exchange.
Direct deeding
A practice where either the relinquished property or the replacement property can be deeded directly from seller to buyer without deeding the property to the Qualified Intermediary (QI).
Exchanger
Another name for the property owner wishing to sell one property and buy another "like kind" replacement property and defer capital gains tax on the proceeds.
Exchange Accommodation Titleholder (EAT)
The third party that holds the title of either the replacement or relinquished property in a 1031 exchange transaction.
Exchange period
The 180-day time span in which the property exchange has to take place. During this period there is also a 45-day period where the exchanger must identify which "like kind" property will be purchased.
Improvement exchange
A 1031 exchange where the Qualified Intermediary or EAT holds the title to the replacement property on behalf of the property seller, and during which time improvements are made to the replacement property. Also known as a Build-to-suit exchange.
Identification period
The 45-day period where the exchanger must identify which "like kind" property will be purchased in a 1031 exchange.
Like Kind property
The replacement propery in a 1031 exchange that is similar in classification or characteristics to the relinquished property. Like kind property cannot be a primary residence or a second home and must be for business or investment purposes.
Partial exchange
When a 1031 exchange also includes receiving cash or excluded (non-like-kind property). In this case, taxes would be incurred on the non-tax deferrable (non-qualifying) portion of the exchange.
Phase 1
The phase where the relinquished property is sold. Also called the down-leg phase of a 1031 exchange.
Phase 2
The phase where the replacement property is purchased. Also called the up-leg phase of a 1031 exchange.
Qualified Intermediary
The third-party that helps facilitate a 1031 exchange transaction. Also called the accommodator.
Relinquished property
The original property sold in a 1031 exchange.
Replacement property
The new "like kind" property bought in a 1031 exchange.
Reverse exchange
A 1031 exchange where the replacement property is bought first and the sale of the relinquished property occurs afterwards. Often used to make improvements to the replacement property before transferring it to the buyer.
Safe harbor
Specifications used to protect the property sellers's money and the Qualified Intermediary in a 1031 exchange.
Section 1031
Section of the IRS code that allows the deferral of capital gains tax on the exchange of "like kind" real estate properties.
Simulataneous 1031 exchange
A 1031 exchange where the sale of the relinquished property and the purchase of the replacement property takes place simulataneously.
Starker exchange
A 1031 exchange where the purchase of the replacement property can take place up to 180 days from the sale of the relinquished property. Also called a deferred or delayed exchange.
Tax deferred exchange
A transaction that allows one to reinvest the proceeds from the sale of real estate property held for investment or business purposes (relinquished property) to another like property (replacement property) and defer capital gains tax that would otherwise be due on the first sale. Also called a 1031 exchange.
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