1031 Exchange Dictionary

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There are 26 entries in the glossary.
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Term Definition
1031 ExchangeA deferred Exchange is defined as an exchange in which, pursuant to "An Agreement", the taxpayer transfers property held either for productive use in a trade or business or for investment and subsequently receives another property to be held either for productive use in a trade or business or for investment.
 
1991 RevisionsAn IRS hearing was held to try and "clean up" the Tax Reform Act of 1984 and to provide uniform terminologies, which are included herein. One of the main results for this revision is that IRS finally had a change of attitude toward Delayed Exchanges by accepting them instead of fighting them.
 
BasisMethod of measuring investment in property for tax purposes. Example: Original cost, plus improvements, minus depreciation taken.
 
BootTaxable situation, whether Cash or Mortgage (Debt Relief).
 
Concurrent ExchangeAn exchange without any time span between the sale and buy.
 
Constructive ReceiptControl of the cash proceeds without actual physical possession by Exchanger or their agent.
 
Deferred ExchangeThis term is now used in place of "Non-Simultaneous Exchange" or "Starker Exchange". This is the type of an exchange where the Exchanger utilizes the exchange period described above.
 
Direct DeedingVested owner deeds directly to the ultimate owner. Does not eliminate the duties of the Qualified Intermediary to acquire and transfer the relinquished property and acquire and transfer the Replacement Property.
 
Downleg PropertyOld property, property being sold by the Exchanger. (now commonly called Phase I property or "Relinquished Property).
 
Exchange AgreementA deferred Exchange is defined as an exchange in which, PURSUANT TO AN AGREEMENT, the Exchanger transfers the relinquished property and subsequently receives the replacement property. THEREFORE, AN EXCHANGE AGREEMENT IS VITAL.
 
Exchange PeriodThe replacement property must be received by the taxpayer within the "Exchange Period", which ends on the earlier of 180 days after the date on which the taxpayer transferred the property relinquished, or the due date for the taxpayer?s tax return for the taxable year in which the transfer of the relinquished property occurs (such as April 15th). Due to the Taxpayer?s ability to extend the date of payment, the exchange period is usually 180 days.
 
ExchangerTaxpayer, Client.
 
Growth FactorInterest earned during the exchange, payable at the end.
 
Identification PeriodThe replacement property must be identified within 45 days of the close of escrow/closing the relinquished property. This 45 day rule is very strict and is not extended if the 45th day should happen to fall on a weekend or a legal holiday.
 
IntermediaryIntermediary is the company who acts as the accommodator in the exchange. A qualified intermediary is identified as follows: 1.) Not a related party to the Exchanger, (e.g. agent, attorney, broker, etc.); 2.) Receives a fee; 3.) Acquires the relinquished property from the Exchanger; and 4.) Acquires the replacement property and transfers it to the Exchanger.
 
Like Kind PropertyAny real property for any other real property if said property(ies) are held for productive use in trade or business or for investment purposes.
 
Like-Kind PropertyAny real property for any other real property if said property(ies) are held for productive use in trade or business or for investment purposes.
 
Phase I PropertyOld property, property being sold by the Exchanger. (Use to be called the Downleg property, now commonly called Phase I property or "Relinquished Property").
 
Phase II PropertyNew property, property being acquired or the target property being brought by Exchanger. (Use to be called Upleg property, now commonly called Phase II property or "Replacement Property").
 
Qualified IntermediaryIntermediary is the company who acts as the accommodator in the exchange. A qualified intermediary is identified as follows: 1.) Not a related party to the Exchanger, (e.g. agent, attorney, broker, etc.); 2.) Receives a fee; 3.) Acquires the relinquished property from the Exchanger; and 4.) Acquires the replacement property and transfers it to the Exchanger.
 
Relinquished PropertyOld property, property being sold by the Exchanger. (Use to be called the Downleg property, now commonly called Phase I property).
 
Replacement PropertyNew property, property being acquired or the target property being brought by Exchanger. (Use to be called Upleg property, now commonly called Phase II property).
 
Safe HarborTerm used to identify the requirements to protect the Exchanger?s money as well as the "Qualified Intermediary."
 
Sequential DeedingProperty is actually deeded to the Intermediary and the Intermediary deeds to the ultimate owner.
 
Simultaneous ExchangeAn exchange without any time span between the sale and buy.
 
StarkerName of the taxpayer in U.S. Court of Appeal's case which authorized Delayed Exchanges. The term a "Starker Exchange" is no longer used to describe a Delayed Exchange.
 


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