Most Used Terminology For 1031 Exchanges
Tax deferred exchanges, like any field, has terminology that is very specific in nature. The terms that follow are commonly used in 1031 Tax Exchanges.
Exchanger – The property owner attempting to sell property and to defer capital gain taxes by completing a 1031 tax exchange.
Relinquished Property
– The real estate sold (also known as the “down-leg” or “exchange” property). Most 1031 Exchanges start with the exchanger selling the relinquished property.
Replacement Property – The property purchased (also known as the “up-leg” or “acquisition” property). Section 1031 exchanges are completed when the exchanger acquires this property.
Identification Period – The time the exchangers have to identify the property or properties to be purchased to complete the 1031 tax exchanges. This time-frame begins on the day the relinquished property is transferred and ends at midnight 45 days later.
Exchange Period – The time allotted to exchangers to acquire their new properties. This period ends 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.
Qualified Intermediary (QI) – This entity facilitates IRS 1031 exchanges for the exchangers.
The QI has many responsibilities in 1031 like kind exchanges, for example, coordinating with the exchangers and their advisors to structure a successful exchange, preparing documents for both the relinquished property and the 1031 replacement property, holding documentation of the identification period and more.
Constructive Receipt - A term that refers to the exchanger having unrestricted control of the equity from the property sold. A Constructive Receipt will invalidate a tax deferred exchange.
Boot (Equity)- Welcome to the Jungle on dvd This is the part of 1031 tax exchanges that is taxable. The exchange to gain tax benefit must be a 1031 “like kind” exchange held for business or investment in order to qualify for a 1031 exchange. The Exchanger will be obligated to pay taxes on the cash boot or mortgage boot if not of equal or greater value when trading into a new property if not done correctly.
Like Kind Property – Any two properties that are of the same nature or character. To qualify as like kind, two properties must be of the same type, but do not have to be of the same quality. Christmas Story video Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. Example: “like kind” 1031 replacement property held for business or investment purposes qualifies for a 1031 exchange.
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[...] Not familiar with 1031 terminology? Read up on the most basic terms of 1031 Exchanges. [...]
[...] Not familiar with 1031 terminology? Read up on the most basic terms of 1031 Exchanges. [...]
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