|
ACCOMMODATOR or QUALIFIED INTERMEDIARY
or FACILITATOR A person or other entity who assists the
Exchanger to effect a tax deferred exchange by holding the
exchange proceeds and acting as the principal in the sale of
the relinquished property and purchase of the replacement
property. The accommodator/intermediary/facilitator cannot
be the taxpayer, a related party or an agent of the taxpayer.
ADJUSTED BASIS Simply stated, the adjusted basis is
equal to the purchase price, plus capital improvements, less
depreciation. Transactions involving exchanges, gifts, probates
and trust distributions may impact the property's adjusted
basis. The Exchanger's tax or legal advisor is the proper party
to determine adjusted basis.
BASIS The starting point for determining gain or loss in
any transaction. In general, basis is the cost of the property.
BOOT Boot is any type of property received in an exchange
that is not like kind, such as cash, mortgage notes, a boat, or
stock. The Exchanger pays taxes on the boot to the extent of
recognized capital gain. In an exchange, any funds not used to
purchase the replacement property will be called boot.
CAPITAL GAIN Generally speaking, this is the difference
between the sales price of the relinquished property less selling
expenses and the adjusted basis of the property.
CONSTRUCTIVE RECEIPT If the Exchanger has control
over the exchange proceeds or property during the exchange
period, he may be deemed in constructive receipt. If the Exchanger
actually or constructively receives the exchange proceeds or
property, the exchange will not qualify under IRC §1031.
DEFERRAL The capital gains tax is not paid until such
time (i.e., it is "deferred") as the Exchanger sells the replacement
property without engaging in another tax deferred exchange.
DIRECT DEEDING At the direction of the Qualified
Intermediary, title is conveyed directly to the ultimate owners
without the Qualified Intermediary being in the chain of title,
thus avoiding the imposition of additional transfer tax.
EXCHANGE ACCOMMODATION TITLEHOLDER
("EAT") the entity that holds title to either the relinquished
property or the replacement property in connection with a
reverse exchange. In most cases, the EAT is affiliated with the
Qualified Intermediary handling the reverse exchange.
EXCHANGE PERIOD The time allowed for the
Exchanger to acquire the replacement property in a delayed
exchange, or the time allowed to dispose of the relinquished
property, in a reverse exchange. In a delayed exchange, it starts
on the day the relinquished property is transferred or in a
reverse exchange, it starts on the day the property is acquired
by the EAT. It ends on the earlier of the 180th day after the
transfer or if no automatic extension is applied for then on the
day the Exchanger's tax return in due often April 15th if the
Exchanger is not an entity on a different fiscal tax year.
IDENTIFICATION PERIOD Within 45 days from the
close of the relinquished property, the replacement property
must be identified in accordance with one of the three adopted
rules. In a reverse exchange, the relinquished property must
be identified within 45 days from the acquisition of the
replacement property.
LIKE KIND PROPERTY Refers to the nature or quality
of the property the Exchanger gives up or receives in the
exchange, such as real property for real property. Real property
does not have to be similar in use, such as raw land for raw
land. Raw land may be exchanged for any other real property
that will be used in a trade or business or held for investment.
Real property located in the United States and real property
located outside of the United States are not like kind. Personal
Property must be either the same General Asset Class or
Product Class.
QUALIFIED EXCHANGE ACCOMMODATION
AGREEMENT ("QEAA") A written agreement whereby
the EAT agrees to purchase and hold title to the replacement
property or relinquished property until the Exchanger is able
to sell the relinquished property.
REALIZED GAIN Refers to gain that is not yet taxed. In a
successful exchange, the gain is realized but not recognized
and therefore not taxed.
RECOGNIZED GAIN Refers to the amount of gain that
is subject to tax when property is disposed of at a gain or
profit in a taxable transfer.
RELATED PARTY IRC §267(b) and 707(b)(1) defines
related party as any person or entity bearing a relationship to
the Exchanger such as: members of a family brothers, sisters,
spouse, ancestors and lineal descendants; a grantor or fiduciary
of any trust; two corporations which are members of the same
controlled group or individuals; corporations and partnerships
with more than a 50% direct or indirect ownership of the
stock, capital or profits in these entities.
RELINQUISHED PROPERTY (Property Sold) The
property given up by the Exchanger in the 1031 exchange
transaction. This portion of the exchange transaction is sometimes
referred to as Phase One.
REPLACEMENT PROPERTY (Property Bought) The
property the Exchanger acquires in a 1031 exchange or Phase
Two of the transaction.
TRANSFER TAX A tax assessed by a city, county or state
on the transfer of property that may be based on equity or
value. The use of direct deeding in an exchange avoids
additional transfer tax.
Can't decide? Need help?
Let us help you.
Bookmark Us!
| 
