Terminology
ACCOMMODATOR: A third party who acts to facilitate an exchange by disposing of or acquiring property in the exchange on behalf of the taxpayer.
ADJUSTED BASIS: The basis of property, adjusted for allowable capital expenditures and deductions, used to determine the value against which gain or loss is measured.
BASIS: A property's value, for tax purposes, at the time of acquisition, depending on how the taxpayer acquired the property.
BOOT: Cash or non qualifying property, received or relinquished in an exchange, to balance equities or values.
CAPITAL GAIN: Amount realized (sales price less selling expenses) upon the disposition of a capital asset or 1231 asset less its adjusted basis.
CAPITAL IMPROVEMENTS: Repair or alteration to a property that increases its value, lengthens its life, or adapts it to a different use.
CONSTRUCTIVE RECEIPT: When money or property is made available to the taxpayer, set apart for the taxpayer, or credited to the taxpayer's account.
DEFERRED OR DELAYED EXCHANGE: An exchange in which the taxpayer disposes of relinquished property and subsequently acquires replacement property, from one to one hundred eighty days later..
DEPRECIATION: The decline in an asset's value due to wear and tear, aging, obsolescence, and exhaustion, usually taken as an annual tax deduction during ownership.
DIRECT DEEDING: The transfer of property from the taxpayer directly to the purchaser of relinquished property and to the taxpayer from the seller of replacement property without requiring the Qualified Intermediary to take title by deed.
DISQUALIFIED PERSON: A person prohibited from acting as a Safe Harbor, because of the person's family or business relationship to the taxpayer.
EQUITY: Value of a property to the owner, measured by the fair market value of the property less any debt on the property.
EXCHANGE: A transaction, or a series of transactions, in which the taxpayer relinquishes property and receives replacement property.
EXCHANGE AGREEMENT: An agreement executed by the taxpayer and the Safe Harbor which provides for the terms under which the Safe Harbor will participate in the taxpayer's exchange.
EXCHANGE PERIOD: The time period beginning on the date the taxpayer first transfers title to relinquished property and ending at midnight on the earlier of the 180th day following the date of transfer or the due date (including extensions) for the taxpayer's tax return for the tax year in which the transfer of the relinquished property occurred.
EXCHANGER: The taxpayer attempting to structure an exchange.
FOUR-WAY EXCHANGE: An exchange, using the services of a Qualified Intermediary, in which the Qualified Intermediary disposes of the relinquished property and acquires the replacement property on behalf of the taxpayer.
IDENTIFICATION NOTICE: A written notice, signed by the taxpayer, specifying potential replacement property identified by the taxpayer.
IDENTIFICATION PERIOD: The time period beginning on the date the taxpayer transfers the relinquished property and ending at midnight on the 45th day following the date of transfer.
I.R.C.: Internal Revenue Code (tax rules legislated by U.S. Congress).
LIKE/KIND EXCHANGE: See TAX DEFERRED EXCHANGE
LIKE/KIND PROPERTY: Referring to the nature or character of property, rather than the grade, quality, or use; property which is considered exchangeable for income tax purposes.
MULTIPLE ASSET EXCHANGE: An exchange involving real and personal property.
95 PERCENT RULE: Any property received prior to the end of the 45-Day Identification Period will be considered to be properly identified, and if the taxpayer receives at least 95 percent of all replacement property identified, all will be considered to be properly identified.
PARTIALLY-DEFERRED EXCHANGE: An exchange, which otherwise satisfies IRS regulations, but includes the receipt of cash or non qualifying property, which triggers partial recognition of the realized gain.
PERSONAL PROPERTY: Movable objects that do not constitute real property.
QUALIFIED ESCROW HOLDER: A person, not the taxpayer or a disqualified person, who holds the taxpayer's funds.
QUALIFIED INTERMEDIARY: A person who is not the taxpayer or a disqualified person and who acts as the accommodator in a four-way exchange.
REAL PROPERTY: Land, including all natural characteristics and any man-made improvements of a permanent nature placed on it.
REALIZED GAIN: Amount realized (sales price less selling expenses) upon the disposition of an asset, less the adjusted basis.
REGULATIONS: Rules promulgated by the U.S. Treasury Department.
RECOGNIZED GAIN: The portion of realized gain which is taxable.
RELATED PARTIES: Persons who are subject to exceptional exchange rules because of their relationship to the taxpayer, by family or business association.
RELINQUISHED PROPERTY: The property disposed of in an exchange.
REPLACEMENT PROPERTY: The property acquired in an exchange.
REVERSE STARKER EXCHANGE: An exchange in which the taxpayer acquires replacement property prior to disposing of relinquished property.
SAFE HARBORS: Methods provided by the IRS Code to prevent the receipt or constructive receipt of non-like/kind property by an exchanging taxpayer.
SIMULTANEOUS EXCHANGE: An exchange in which the taxpayer acquires replacement property at the same time that he or she transfers title to the relinquished property.
STARKER EXCHANGE: See DEFERRED EXCHANGE.
STEPPED-UP BASIS: Basis for heirs who acquire property by inheritance, which is the fair market value of the property at the time of death.
STRAIGHTLINE DEPRECIATION: depreciation method in which the same amount is deducted each year over the economic life of the asset.
TAX-DEFERRED EXCHANGE: An exchange executed under the provisions of IRS Code Section 1031 which results in the deferral of otherwise recognized gain.
TAX-FREE EXCHANGE: See TAX-DEFERRED EXCHANGE.
1031 EXCHANGE: See TAX-DEFERRED EXCHANGE.
THREE-PROPERTY RULE: One, two, or three replacement properties can be identified by the taxpayer in an exchange, regardless of the fair market value of the relinquished property or of the identified replacement properties.
200 PERCENT RULE: Any number of replacement properties can be identified by the taxpayer in an exchange, provided that their combined fair market value does not exceed 200 percent of the combined fair market value of the relinquished property.