Identification Period
The replacement property must be identified within 45 days of the close of escrow/closing the relinquished property. If the 45th day happens to fall on a weekend or legal holiday, it is not to be extended.
Income Property
Real estate that generates cash flow.
Intermediary
The party who facilitates a tax deferred exchange by acquiring and selling property in an exchange. The intermediary plays a role in almost all exchanges these days. He or she neither begins nor ends the transaction with any property. He or she buys and then resells the properties in return for a fee.
Leverage
The degree to which an investor or business is using borrowed money.
Liquidate
To convert assets into cash.
Like-Kind Property
Any valid property for any other valid property if the property(s) are held for productive use in trade, business or for investment purposes.
Liquidity
The ability of an asset to be converted into cash quickly.
National Association of Securities Dealers (NASD) - Financial Industry Regulatory Industry (FINRA)
A self-regulatory securities industry organization responsible for the operation and regulation of the stock market and for conducting regulatory reviews of members' business activities.
Net Lease
A property lease in which the tenant pays all expenses normally associated with ownership, such as utilities, maintenance, repairs, insurance, and taxes.
Net Worth
Total assets minus total liabilities of an individual or company.
Non Recourse Loan
A loan whose terms include the lender agreeing that its sole remedy in the event of failure to repay will be to foreclose against the property securing the loan.
NNN Triple Lease
A lease that requires the tenant to pay for property taxes, insurance and maintenance in addition to the rent (also referred to as Net Net Net Lease or Triple Net Lease).
Operating Costs
The day-to-day expenses of running a business.
Ordinary Income
Income other than capital gains.
Passive Income
Income derived from business investments in which the individual is not actively involved, such as a real estate limited partnership.
Portfolio
All investments collectively owned by the same individual or organization.
Qualified Intermediary (QI)
The corporation who acts as the accommodator in the exchange.
A qualified intermediary is identified as follows:
1. Not a related party to the Exchanger, (e.g. agent, attorney, broker, etc.);
2. Receives a fee;
3. Acquires the relinquished property from the Exchanger; and
4. Acquires the replacement property and transfers it to the Exchanger.
Realized Gain
Gain that is not necessarily taxed. In a successful exchange the gain is realized but not recognized and thus not taxed.
Recognized Gain
Amount of gain which is subject to tax when property is disposed of at a gain or profit in a taxable transfer.
Relinquished Property
Old property that is being sold by the Exchanger. (Formally called the Down leg property, currently called Phase I property).
Replacement Property
New property being acquired or the target property being brought by Exchanger. (Formally called up leg property, currently called Phase II property).
Return
The profit made on an investment, expressed annually as a percentage of the total amount invested.
Registered Representative
An individual who is licensed to sell securities and has the legal power of an agent, having passed the Series 7 and Series 63 examinations. Usually works for a brokerage licensed by the SEC and NYSE, or FINRA.
Safe Harbor
Term identifying the requirements to protect the Exchanger's money and the "Qualified Intermediary."
Securities and Exchange Commission (SEC)
The primary federal regulatory agency for the securities industry, whose responsibility is to promote full disclosure and to protect investors against fraudulent and manipulative practices in the securities markets.
Securities Investor Protection Corporation (SIPC)
A non-profit membership corporation established by Congress that insures securities and cash in customer accounts up to $500,000 (up to $100,000 in cash) in the event of brokerage bankruptcy.
Seller
The person who owns the property that the taxpayer wants to acquire in the exchange in a three or four party exchange.
Sequential Deeding
Property that's deeded to the Intermediary whereby the Intermediary deeds to the final owner.
Simultaneous/Concurrent
Exchange without any time between the sale and purchase.
Simultaneous Exchange
Also referred to as a concurrent exchange when the Exchanger transfers out of the Relinquished Property and receives the Replacement Property at the same time.
Sponsor Firm
The real estate organization responsible for acquiring the property, gathering investors, obtaining financing, property and asset management, maintaining customer relations and reporting, and paying monthly/quarterly distributions to investors.
Starker Exchange
A term used to describe delayed exchanges. "Starker vs. Commissioner" established the delayed exchange concept. The term "starker exchange" is used as another way of referring to delayed, deferred or any other non-simultaneous exchange.
Tax-advantaged
Having other tax benefits that typically result in tax savings.
Taxpayer
Also known as the exchanger. A taxpayer has property and would like to exchange it for new property. While all parties in an exchange are theoretically taxpayers, this term applies to the party who expects to receive tax deferred treatment under Section §1031.
Tax Reform Act of 1984
In the Tax Reform Act of 1984, Congress addressed the IRS's continued displeasure with the Starker decision by amending Section §1031 to allow Delayed Exchanges; but only if all of the exchange property is identified and acquired within specific deadlines (see Exchange Period). And most important in the Conference Report accompanying the 1984 Act, Congress specifically reaffirmed that a "sale" followed by reinvestment in like-kind property doesn't qualify for tax deferral under Section §1031. So to qualify for tax deferral, it is still essential to cautiously structure an exchange to avoid actual or constructive "receipt" of proceeds of sale and to prevent characterization of the transaction as a taxable sale and reinvestment.
Tax Shelter
A technique that allows an investment to be legally exempt from federal, state, and local taxes to varying degrees.
Tenant In Common
A form of holding title to real property. A TIC investment represents co-ownership of real estate by two or more investors. TIC investors are on the deed and considered a direct owner of the underlying real estate.
Transaction Costs
Any cash paid by way of commission or other expense in an exchange. Transaction costs are deducted in computing the consideration received.
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.
Umbrella Partnership Real Estate Investment Trust (UPREIT)
An Umbrella Partnership Real Estate Investment Trust or UPREIT may utilize both Internal Revenue Code Section 1031 Exchange and 721 Exchange. In an UPREIT structure, the investor executes a 1031 exchange into one Tenant In Common (TIC) property. Then about 12-18 months later, a call option may be exercised in which the property the investor owns as a TIC may be contributed to a partnership, thus a 721 Exchange. At this point the investor receives interest in the partnership called operating partnership units (OP units). OP units can be converted later into shares of the associated REIT, and may only be taxable when such a conversion or liquidation takes place.
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CORPORATE PROFILE 
1031 Glossary of Terms
