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common exchange terms»organizations & agencies
Common Exchange Terms Defined
Accommodator
A professional who facilitates 1031 exchangor transactions. May also be called "Qualified Intermediary (QI) or "Facilitator".
Qualified Intermediary
Defined in Regulation Section 1.1031(k)-1(g(4) as a person who is not the exchanor or a disqualified person who enters into an exchange agreement with the exchangor and, pursuant to the agreement, acquires and transfers the relinquished property from the exchangor and acquires and tansfers the replacement property to the exchangor.
Adjusted Basis
The original cost of a property, plus the value of improvements, minus depreciation taken.
Basis
The cost of a property used to compute gain/loss.
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Boot
Also called "taxable boot", this is money or other non like kind property paid to the taxpayer in an exchange, Boot is taxable.
Build to Suit Exchange
Also called a "Construction Exchange" or an "Improvement Exchange". Allows a taxpayer to identify and acquire a property to be constructed.
CES
An acronym for "Certified Exchange Specialist", a designation available through the Federation of Exchange Accommodators (FEA) since 2003. To obtain the designation, exchange professionals with at least 3 years of exchange industry experience must pass a comprehensive exam to measure their knowledge on facilitating exchange transactions. They must maintain their knowledge through continuing education courses and renew their CES designation every 2 years.
Capital Gain
The difference between the net selling price and the adjusted basis of a property. The capital gain may be deferred in an exchange.
Delayed Exchange
Considered the "Normal" type of exchange. Also called a "Forward Exchange" in which the old property is sold and the new property acquired at a subsequent time.
Depositors Insurance Fund
A private industry-sponsored insurance company, created by a special act of the Massachusetts Legislation in 1932. The Depositors Insurance Fund (DIF) insures the portion of deposits in its member banks in excess of the FDIC's $100,000.00 per depositor limit.
Disqualified Person
Any person who acts as the taxpayer's agent, employee, attorney or broker and any brother, sister, spouse, ancestor or lineal descendants. A disqualified person is also any corporation where 10% of the outstanding stock is owned by or for the taxpayer either directly or indirectly, or any beneficiary of a trust where the taxpayer is the grantor.
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EAT
Acronym for "Exchange Accommodation Title Holder". The EAT is an entity that buys and holds a property in a reverse exchange or construction exchange. The EAT may not be the taxpayer or a disqualified person.
Exchange Agreement
A document prepared at the beginning of an exchange outlining understandings between the taxpayer and the Qualified Intermediary. This document must be signed by the taxpayer before the exchange can begin.
FEA
Acronym for the "Federation of Exchange Accommodators".
Facilitator
A professional who facilitates 1031 exchange transactions. May also called a Qualified Intermediary (QI) or "Accommodator"
FORM 8824
Exchanges are reported on the taxpayer's return on Form 8824. The form lists the realized gain, recognized gain, new basis, and date the taxpayer sold the relinquished property, and the date the replacement property was indentified and acquired.
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Gain
An accounting term used to describe the amount a property has appreciated since being purchased (plus the amount of any depreciation allowable over the term of ownership).
Identification
The act of describing potential replacement properties in a IRC §1031 exchange. An identification must be completed within 45 days of the sale of the relinquished property.
Like Kind
Similar in nature or character, notwithstanding differences in grade or quality. All real property is like kind , regardless of whether is is improved or unimproved and regardless of the type of improvement or interest. Therefore, raw land is like kind to a duplex. A tenancy in common interest is like kind to a fee simple interest. One property is like kind to more than one property. A shopping center is like kind to a single family house. A residential apartment building is like kind to a storage facility.
LLC
An acronym for "Limited Liability Company". An LLC is a legal entity frequently used for purposes of ownership of real estate. An LLC may elect to be treated as a partnership for tax purposes.
Net Sales Price
The net sales price is the gross sales price, less transaction costs such as fees, transfer taxes and closing credits to the buyer.
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QEAA
An acronym for " Qualified Exchange Accommodation Agreement", The QEAA is a document used in a Reverse Exchange or construction exchange to define the various rights and obligations of the EAT and the taxpayer.
Qualified Property
In general, all property, both real and personal, can qualify for tax-deferred treatment so long as the properties meet the like kind and purpose requirements.
Realized Gain
Difference between the net sales price of a property and the adjusted cost basis at the time of sale.
Recognized Gain
Portion of the realized gain, which is taxable. In an exchange the recognized gain is equal to the net boot recorded.
Relinquished Property
Property the exchangor owns and wants to sell in an IRC §031 Exchange.
Replacement Property
Property the exchangor wants to acquire to complete an IRC §1031 Exchange.
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Reverse Exchange
An exchange in which the EAT acquires the replacement property before the relinquished property is sold.
TIC
An acronym for "Tenant in Common". TIC property is property jointly owned by several investors as tenants in common. It is a legal term which discribes the relationships between the owners.
Undivided Interest
When two or more owners of a property own individually deeded portions of the property they own as tenants in common.
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