Accommodator - Also referred to as Qualified Intermediary.
Boo t- A property that is not “like -kind” such as securities, cash, notes, partnership interests, etc. Taxpayer who receives boot will have to recognize gain to the extent of the net boot received or realized gain, whichever is less.
Capital Gain - An increase in the value of a capital asset that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short-term (one year or less) or long-term
(more than one year), and must be claimed on income taxes.
Exchange Period - This is the period within which a person who has sold
the relinquished property must receive the replacement property. This is the Exchange Period under 1031 exchange (IRS) rule. This period ends at exactly 180 days after the date on which the person transfers the property relinquished or the due date for the person's tax return for that taxable year in which the transfer
of the relinquished property has occurred, whichever situation is earlier. Now according to the 1031
exchange (IRS) rule, the 180 day timeline has to be adhered to under all circumstances and is not extendable
in any situation, even if the 180th day falls on a Saturday, Sunday or legal (US) holiday.
Fair Market Value - Fair market value is the price that a property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.
Delayed Exchange - A strategy for selling one qualified property and the subsequent acquisition of another property within a specific time frame for the deferral of capital gain taxes.
Identification Period -This is the period during which the taxpayer selling a property must identify up to 3 replacement properties that he/she proposes to buy (in writing). This period is exactly 45 days from the
day of selling the relinquished property. This 45 day timeline must be followed under all circumstances and
is not extendable in any way, even if the 45th day falls on a Saturday, Sunday or legal US holiday.
“Like-Kind” Property - Refers to the character of the property and not to its "grade or quality." That is,
real property held for investment or the productive use in a trade or business may be exchanged on a
tax-deferred basis for other real property. Personal property held for investment or the productive use in a trade or business may generally be exchanged on a taxdeferred basis for other personal property, provided
the personal property is of "like kind" or "like class." Professional tax advice should always be obtained when planning exchanges.
Napkin Rule - You must buy a Replacement Property of equal or greater value to the Relinquished Property in order to completely defer the applicable capital gains tax. If you purchase a property of lesser value, you
will be responsible for any tax on the difference. You must use all the cash proceeds from the sale on your purchase in order to completely defer the applicable capital gains tax. Now if you happen not use all your proceeds on the purchase, you will be responsible for any tax on the difference.
Qualified Intermediary - Fourth party" who assists Taxpayer in accomplishing exchange. Qualified Intermediary enters into formal exchange agreement with Taxpayer and, pursuant to agreement, holds Taxpayer's "Net Effective Equity" and uses same to acquire Replacement Property.
Relinquished Property - Property Taxpayer disposes of in exchange.
Replacement Property - Is the new property being acquired by the taxpayer when making a 1031 exchange
.
Reverse Exchange - This is the type of exchange in which the replacement property is purchased before the sale of the relinquished property.
3 Property Rule - The Taxpayer may identify up to 3 properties, without regard to their value.
200% Rule - The 1031 taxpayer may identify more than three properties, provided their combined fair
market value does not exceed 200% of value of the relinquished property.
95% Rule - The 1031 taxpayer may identify any number of properties, without regard to their value, provided the taxpayer acquires 95% of the fair market value of the properties identified.
Tenancy In Common - A fractional or partial ownership interest in a piece
of property, rather than owning the entire piece of property.
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