“Basis” -the value invested in property for tax purposes. Calculation: original cost, plus improvements, minus depreciation taken.
“Boot” – non-qualified (non “like kind”) property received in an exchange. (Examples: cash, promissory notes, furniture, reduction in debt obligations.)
“Constructive Receipt” – control of proceeds by the Taxpayer (even though funds may not directly be in the Taxpayer’s possession).
“Deferred Exchange” or “Delayed Exchange” – an exchange qualifying for non-recognition treatment under Section 1031 of the Internal Revenue Code where there is a gap in time between the transfer of the relinquished property and the receipt of the replacement property.
“Direct Deeding” -deeding of the relinquished property from the Taxpayer directly to the buyer, or the replacement property from the seller directly to the Taxpayer, without passing title through the intermediary.
“Disqualified Person” – a related person (determined under income tax regulations) or agent of the Taxpayer (including an attorney, accountant, real estate agent, or investment banker). A Disqualified Person may not act as the Taxpayer’s intermediary in an exchange.
“Exchange Accommodation Titleholder” -person or entity other than the Taxpayer or a Disqualified Person that agrees to take title to either the Taxpayer’s relinquished or replacement property until such time as the Taxpayer is able to sell the relinquished property to a third-party buyer.
“Exchange Period” – the period during which the Taxpayer must acquire his/her replacement property. It begins on the day in which the relinquished property is transferred and ends at midnight on the 180th day thereafter or the due date (including extensions) of Taxpayer’s tax return, whichever is earlier.
“Identification Period” – the period during which the Taxpayer must identify hisher replacement property. It begins on the day in which the relinquished property is transferred and ends at midnight on the 45th day thereafter.
“Intermediary” or “Qualified Intermediary (QI)” – a person or entity that facilitates the exchange for the Taxpayer.
“Like Kind Property” – refers to the nature or character of the property, and not its grade or quality. Generally, real property is “like kind” lo all other real property, as long as the Exchangor’s intent is to hold the properties as an investment or for productive use in a trade or business. The “like kind” rules for personal property, however, are much more restrictive.
“Relinquished Property” – the property that is transferred by the Taxpayer in an exchange.
“Replacement Property” – the property that is acquired by the Taxpayer in an exchange.
“Taxpayer” or “Exchanger” -the person who is seeking to defer capital gains tax through a Section 1031 exchange.