A plain-English encyclopedia of Section 1031 terminology, exchange mechanics, federal tax vocabulary and the real-estate language investors encounter around replacement property. Search a term, acronym, phrase or question. Federal tax concepts point back to primary IRS sources.
Search acronyms, aliases or related concepts—for example “QI,” “taxable boot,” “rent roll,” “three property rule” or “debt coverage.”
Also: like-kind exchange · tax-deferred exchange · Section 1031 exchange
A transaction structure that may defer recognition of gain when qualifying real property is exchanged for qualifying like-kind real property.
Explain this term →Also: IRC 1031 · Internal Revenue Code Section 1031 · §1031
The federal tax-code section governing like-kind exchanges of qualifying real property.
Explain this term →Also: like kind · like-kind real estate
Property of the same nature or character for Section 1031 purposes; for real estate, the concept is broader than “same property type.”
Explain this term →Also: sale property · property given up · downleg
The qualifying property the taxpayer transfers or gives up in the exchange.
Explain this term →Also: upleg · acquisition property
The property the taxpayer receives as the replacement in a Section 1031 exchange.
Explain this term →Also: QI · exchange intermediary · 1031 intermediary · 1031 accommodator
A commonly used independent facilitator that enters into an exchange agreement and helps structure transfers so the taxpayer does not simply receive the exchange proceeds.
Explain this term →Also: qualified intermediary · 1031 QI
Industry shorthand for a qualified intermediary.
Explain this term →Also: 1031 proceeds · exchange proceeds
Sale proceeds being held and deployed as part of the exchange structure.
Explain this term →Also: receipt of proceeds
The taxpayer physically or directly receives money or property.
Explain this term →Also: constructive receipt of funds
A tax concept under which money may be treated as received even if it is not physically in the taxpayer’s hands, because it is available or controlled by the taxpayer.
Explain this term →Also: taxable boot · non-like-kind property
Common exchange-industry shorthand for money or non-like-kind property received in an exchange that can trigger recognized gain.
Explain this term →Also: cash received · cash out
Cash or other money received as part of an exchange that may produce recognized gain.
Explain this term →Also: debt relief · mortgage relief · net debt relief
Industry shorthand for potential taxable consequences associated with net debt relief in an exchange.
Explain this term →Also: delayed exchange · forward exchange
An exchange in which the replacement property is received after the relinquished property is transferred.
Explain this term →Also: same-day exchange · concurrent exchange
An exchange in which the relinquished and replacement properties are transferred essentially at the same time.
Explain this term →Also: parking exchange · replacement first exchange
A structure used when the replacement property is acquired before the relinquished property is transferred.
Explain this term →Also: construction exchange · build-to-suit exchange · rehab exchange
A specialized structure in which improvements to replacement property are incorporated into the exchange before the taxpayer receives the property.
Explain this term →Also: improvement exchange · construction exchange
Another common name for an improvement exchange.
Explain this term →Also: partial 1031 · partially taxable exchange
An exchange in which only part of the transaction receives deferral and some gain may be currently recognized.
Explain this term →Also: QI agreement · 1031 exchange agreement
The written agreement between the taxpayer and qualified intermediary that governs the intermediary’s role and exchange mechanics.
Explain this term →Also: assignment of contract · 1031 assignment
The transfer of contractual rights or obligations from one party to another.
Explain this term →Also: direct deed · direct transfer
A common exchange-closing technique where title passes directly between the underlying parties even though the QI is treated as acquiring and transferring property for exchange purposes under the safe harbor.
Explain this term →Also: 45 day rule · identification period · day 45
The federal window for identifying replacement property in a deferred exchange.
Explain this term →Also: 180 day rule · exchange period · day 180
The federal outer timing window for receiving replacement property in a deferred exchange, subject to the tax-return due-date rule.
Explain this term →Also: earlier of rule · return due date limitation
The rule that can shorten the exchange period if the federal return due date arrives before day 180.
Explain this term →Also: written identification · replacement property ID letter
The written designation of replacement property in a deferred exchange.
Explain this term →Also: clear property description · legal description requirement
A description precise enough to identify the intended replacement property.
Explain this term →Also: 3-property rule · three property rule
An identification rule allowing up to three replacement properties regardless of their fair market value.
Explain this term →Also: 200 percent rule · two hundred percent rule
An identification rule permitting any number of replacement properties when their total fair market value does not exceed 200% of the aggregate fair market value of the relinquished properties.
Explain this term →Also: 95 percent rule · ninety-five percent rule
A narrow rule that may preserve an identification when too many properties were identified, if enough of the identified value is actually received.
Explain this term →Also: revoke identification · cancel identification
A written cancellation of a prior replacement-property identification within the identification period.
Explain this term →Also: disqualified party · agent restriction
A person who cannot serve in certain safe-harbor roles because of specified agency or relationship rules.
Explain this term →Also: 1031 safe harbor · regulatory safe harbor
A prescribed structure that, when its requirements are satisfied, provides specified protection against an IRS challenge on the covered issue.
Explain this term →Also: related person · related-party exchange
A person or entity related to the taxpayer under federal tax rules.
Explain this term →Also: 2-year rule · two year holding rule
A rule that can cause deferred gain or loss from certain related-party exchanges to become recognized if either party disposes of the exchanged property within two years, unless an exception applies.
Explain this term →Also: EAT · accommodation titleholder
The person or entity that holds qualified indicia of ownership of parked property in a qualifying reverse or improvement exchange safe-harbor structure.
Explain this term →Also: exchange accommodation titleholder
Acronym for exchange accommodation titleholder.
Explain this term →Also: qualified exchange accommodation arrangement · qualified exchange accommodation agreement
A safe-harbor parking arrangement described in Rev. Proc. 2000-37.
Explain this term →Also: parked property · property parking
A structure in which an accommodation party temporarily holds replacement or relinquished property as part of a reverse or improvement exchange.
Explain this term →Also: investment intent · investment property use
A qualifying purpose under Section 1031: holding real property for investment rather than primarily for personal use or resale to customers.
Explain this term →Also: business-use property · trade or business use
Another qualifying purpose for real property under Section 1031.
Explain this term →Also: property held primarily for sale · inventory property · flip property
Real property held primarily for sale rather than for investment or productive use; it generally does not qualify for Section 1031.
Explain this term →Also: investment intent · holding intent
The taxpayer’s purpose for holding the relinquished and replacement properties.
Explain this term →Also: how long property is held · minimum hold
The amount of time an investor owns property.
Explain this term →Also: Rev. Proc. 2008-16 · dwelling unit safe harbor · second home 1031
An IRS safe harbor addressing when certain dwelling units can be treated as held for investment for Section 1031 purposes.
Explain this term →Also: primary residence · home
A home held primarily for personal use rather than investment or business use.
Explain this term →Also: part business part personal · mixed personal and rental use
Property with both qualifying investment/business use and personal or nonqualifying use.
Explain this term →Also: real estate · realty
Land, buildings and certain other interests treated as real property under federal Section 1031 rules.
Explain this term →Also: equipment · machinery · business personal property
Property that is not real property, such as many items of equipment, machinery, vehicles and other movable assets.
Explain this term →Also: domestic vs foreign property · foreign real estate
The rule that U.S. real property and real property outside the United States are not like kind to each other.
Explain this term →Also: IRS Form 8824 · Like-Kind Exchanges form
The federal form used to report like-kind exchanges and certain related information.
Explain this term →Also: economic gain · gain realized
The economic/tax gain generated by the disposition before determining how much is currently recognized.
Explain this term →Also: taxable gain · gain recognized
The portion of gain included currently for tax purposes.
Explain this term →Also: unrecognized gain · tax-deferred gain
Gain that is not recognized currently because qualifying exchange treatment applies.
Explain this term →Also: tax basis · cost basis
A tax measure of investment in property used in calculating gain, loss, depreciation and other tax items.
Explain this term →Also: tax adjusted basis · adjusted tax basis
Basis after increases and decreases required by tax rules.
Explain this term →Also: substituted basis · exchange basis
The general concept that tax basis from the relinquished property carries into the replacement property, with adjustments required by the exchange rules.
Explain this term →Also: new-money basis · additional basis
Basis attributable to additional investment above the carryover component in replacement property.
Explain this term →Also: FMV · market value
The price at which property would change hands between willing parties under ordinary market conditions, used in many tax calculations.
Explain this term →Also: tax depreciation · depreciation deduction
The tax deduction framework that allocates the cost or other basis of qualifying property over its recovery period.
Explain this term →Also: recapture tax · depreciation recapture tax
A general term for tax rules that can cause prior depreciation deductions to affect the character or rate of gain when depreciable property is disposed of.
Explain this term →Also: 1250 gain · unrecaptured 1250
A category of long-term capital gain generally associated with depreciation taken on Section 1250 real property and subject to special tax-rate treatment.
Explain this term →Also: capital gains tax · gain on sale
Gain that receives capital-gain treatment under the tax rules.
Explain this term →Also: 1031 exchange costs · exchange fees
Costs incurred to structure and complete an exchange.
Explain this term →Also: settlement costs · transaction costs
Costs charged in connection with purchasing, selling, financing and closing real estate.
Explain this term →Also: qualified escrow · 1031 escrow
An escrow arrangement meeting specified safe-harbor requirements that can restrict the taxpayer’s access to exchange funds.
Explain this term →Also: 1031 qualified trust
A trust arrangement meeting specified safe-harbor requirements for deferred exchange funds.
Explain this term →Also: exchanger · exchange taxpayer
The person or entity whose property is being exchanged and whose tax treatment is at issue.
Explain this term →Also: same taxpayer rule · same entity rule
Industry shorthand for the need to maintain appropriate taxpayer continuity between the relinquished and replacement sides of an exchange.
Explain this term →Also: single-member LLC · SMLLC · tax disregarded LLC
An entity that is ignored as separate from its owner for certain federal income-tax purposes.
Explain this term →Also: partnership units · LLC membership interest
An ownership interest in a partnership or entity taxed as a partnership.
Explain this term →Also: TIC · tenant in common
A form of direct co-ownership in which each owner holds an undivided interest in property.
Explain this term →Also: tenancy in common · tenant-in-common interest
Acronym for tenancy in common.
Explain this term →Also: drop & swap · partnership drop
Industry slang for restructuring partnership-owned property into direct co-ownership before one or more owners pursue separate dispositions or exchanges.
Explain this term →Also: swap & drop · exchange then distribute
Industry slang for completing an exchange and later distributing property interests from an entity to owners.
Explain this term →Also: fractional ownership · co-ownership share
An ownership interest representing less than 100% of a property or investment.
Explain this term →Also: Delaware Statutory Trust · 1031 DST
Common shorthand for Delaware Statutory Trust, a legal trust structure often used in securitized fractional real-estate offerings.
Explain this term →Also: DST · Delaware trust
A statutory trust formed under Delaware law; in 1031 practice, the term commonly refers to fractional real-estate investment programs structured through a DST.
Explain this term →Also: registered representative · broker-dealer representative · investment professional
A licensed professional involved when a replacement-property product is a security.
Explain this term →Also: home sale exclusion · principal residence exclusion · IRC 121
The federal provision that can exclude qualifying gain on the sale of a principal residence, subject to its requirements and limits.
Explain this term →Also: involuntary conversion · condemnation replacement · casualty replacement
A separate tax provision addressing certain involuntary conversions, such as qualifying condemnations or casualties, with its own replacement rules and timelines.
Explain this term →Also: 721 contribution · partnership contribution
A separate tax rule that can allow nonrecognition when property is contributed to a partnership in exchange for a partnership interest, subject to applicable rules.
Explain this term →Also: umbrella partnership REIT · 721 UPREIT
A real-estate structure in which property owners may contribute property to an operating partnership associated with a REIT, typically in exchange for operating-partnership units.
Explain this term →Also: Section 453 · seller financing tax deferral
A sale in which at least one payment is received after the tax year of sale and gain may be recognized over time under the installment method when the rules apply.
Explain this term →Also: fee simple absolute · full ownership
A broad form of real-property ownership representing the owner’s estate in land, subject to governmental powers and private encumbrances.
Explain this term →Also: leasehold estate · tenant interest
The tenant’s possessory interest under a lease.
Explain this term →Also: land lease · ground rent
A lease in which a tenant leases land, often for a long term, and may own or construct improvements on it.
Explain this term →Also: triple-net lease · net lease · NNN
A lease structure in which the tenant typically bears specified property expenses such as taxes, insurance and maintenance, subject to the actual lease language.
Explain this term →Also: full service lease · gross rent
A lease in which the landlord pays many property operating expenses from rent, with the exact allocation determined by the lease.
Explain this term →Also: net operating income · property NOI
Net operating income: property revenue less ordinary operating expenses before debt service and certain non-operating items.
Explain this term →Also: capitalization rate · going-in cap
A yield metric commonly calculated as annual NOI divided by property value or purchase price.
Explain this term →Also: debt service coverage ratio · debt coverage
A ratio comparing property cash flow, commonly NOI, with required debt service.
Explain this term →Also: loan-to-value · loan to value ratio
Loan amount divided by property value.
Explain this term →Also: loan-to-cost · loan to cost ratio
Loan amount divided by total project cost, often used in development and renovation financing.
Explain this term →Also: loan debt yield
A lender metric commonly calculated as NOI divided by loan amount.
Explain this term →Also: CoC return · cash yield
Annual pre-tax cash flow divided by the investor’s cash invested.
Explain this term →Also: tenant schedule · rent schedule
A property schedule listing tenants, units, rents, lease dates and related occupancy information.
Explain this term →Also: trailing 12 · trailing twelve months · T12
A trailing twelve-month operating statement showing recent property income and expenses.
Explain this term →Also: projected operating statement · forecast NOI
A forecast of future property income, expenses and operating performance.
Explain this term →Also: OM · investment sales package · offering memo
A marketing document summarizing an investment property, its financials, market story and transaction terms.
Explain this term →Also: letter of intent · term sheet
A preliminary document outlining major proposed deal terms before definitive contracts are negotiated.
Explain this term →Also: PSA · purchase agreement · contract of sale
The definitive contract governing a real-estate purchase and sale.
Explain this term →Also: EMD · deposit · contract deposit
Money deposited to support a buyer’s obligations under a purchase contract.
Explain this term →Also: DD · property diligence · buyer diligence
The investigation of a property, transaction and counterparties before closing.
Explain this term →Also: closing escrow · escrow account
An arrangement in which a neutral third party holds money, documents or instructions pending satisfaction of stated conditions.
Explain this term →Also: property title · ownership title
The legal ownership interest in real property and the rights associated with it.
Explain this term →Also: owner title policy · lender title policy
Insurance protecting against specified covered title defects, subject to the policy’s terms, exceptions and exclusions.
Explain this term →Also: lien · title burden
A claim, lien, restriction, easement or other interest that burdens or affects property title.
Explain this term →Also: right of way · access easement
A nonpossessory right to use or control part of another person’s real property for a specified purpose.
Explain this term →Also: land title survey · ALTA/NSPS survey
A detailed land-title survey prepared to recognized professional standards and commonly used in commercial real-estate transactions.
Explain this term →Also: Phase I ESA · environmental Phase I · ESA
A standardized environmental due-diligence assessment commonly used to identify potential environmental conditions and support liability defenses.
Explain this term →Also: real estate appraisal · valuation report
An opinion of property value prepared by a qualified appraiser under applicable standards.
Explain this term →Also: closing prorations · tax proration · rent proration
An allocation of income or expenses between buyer and seller as of the closing date.
Explain this term →Also: closing statement · ALTA statement · HUD statement
A closing document summarizing funds, charges, credits and disbursements for the transaction.
Explain this term →Also: tenant estoppel · lease estoppel
A tenant statement confirming specified lease facts such as rent, term, defaults, amendments and deposits.
Explain this term →Also: subordination non-disturbance and attornment agreement · non-disturbance agreement
An agreement among landlord, tenant and lender addressing priority, continued occupancy and recognition of the lease following specified lender actions.
Explain this term →Also: land use zoning · zoning district
Local land-use rules controlling permitted uses, density, bulk and other development or operating conditions.
Explain this term →Also: QI due diligence · selecting a QI
The process of evaluating a QI’s experience, controls, financial safeguards, cyber practices, banking relationships, insurance and documentation.
Explain this term →Also: CPA · tax accountant · tax preparer
The tax professional who helps model gain, basis, reporting and the interaction of the exchange with the taxpayer’s broader return.
Explain this term →Also: tax counsel · 1031 attorney
An attorney advising on tax-law issues, transaction structure and legal risk.
Explain this term →Also: closing attorney · transaction counsel
An attorney handling real-estate contracts, title, closing, entity and property-law matters.
Explain this term →Also: CRE broker · investment sales broker · commercial broker
A licensed real-estate professional representing buyers, sellers, landlords or tenants in commercial property transactions.
Explain this term →Also: mortgage lender · commercial lender · capital provider
A bank, credit union, debt fund, agency lender or other capital provider financing a property acquisition or refinance.
Explain this term →Also: exchange accommodator · facilitator
An industry term often used for a company or professional facilitating 1031 exchanges.
Explain this term →