Solomon C, Lao, CCIM.  Your Partner In Commercial Real Estate.

Tax Deferred Exchange Terminology...

As with any other specific area of real estate law, tax deferred exchanges under IRC  1031 have their own language, which may be confusing to those who are unfamiliar with these transactions. The following are some of the exchange terms and phrases that are often used with their "plain-English" interpretations.

1. Boot Fair Market Value of non-qualified (not "like-kind") property received in an exchange. (Examples: cash, notes, seller financing, furniture, supplies, reduction in debt obligations.)
2. Constructive Receipt A term referring to the control of proceeds by an Exchanger even though funds may not be directly in their possession.
3. Exchanger The property owner(s) seeking to defer capital gain tax by utilizing a Section 1031 exchange. (The Internal Revenue Code uses the term "Taxpayer.")
4. Like-Kind Property This term refers to the nature or character of the property, not its grade or quality. Generally, real property is "like-kind" as to all other real property as long as the Exchanger's intent is to hold the properties as an investment or for productive use in a trade or business. With regards to personal property, the definition of "like-kind" is much more restrictive. (See Brief Exchange, Like-Kind Property.)
5. Qualified Intermediary The entity that facilitates the exchange for the Exchanger. Though the Treasury Regulations use the term "Qualified Intermediary" some companies use the term "facilitator" or "accommodator". Qualified Intermediary The entity that facilitates the exchange for the Exchanger. Though the Treasury Regulations use the term "Qualified Intermediary" some companies use the term "facilitator" or "accommodator".
6. Relinquished Property The property "sold" by the Exchanger. This is also sometimes referred to as the "exchange" property or the "downleg" property. Relinquished Property The property "sold" by the Exchanger. This is also sometimes referred to as the "exchange" property or the "downleg" property.
7. Replacement Property The property acquired by the Exchanger. This is sometimes referred to as the "acquisition" property or the "upleg" property.