1031 Exchange Terms you
Need to Know

1031 Exchange (Like-Kind Exchange)

A tax-deferral strategy that allows real estate investors to sell one property and reinvest the proceeds in another like-kind property, thus deferring capital gains taxes.

Boot Value

The amount of cash or non-like-kind property received by the exchanger in an exchange, which is subject to capital gains tax.

Capital Gain

The profit realized from the sale of an investment property, subject to capital gains tax if not deferred through a 1031 Exchange.

Capital Gain Tax Rate

The rate at which capital gains are taxed, which can vary depending on factors such as the taxpayer's income and the duration of property ownership.

Capital Gains Rate

The tax rate applied to capital gains, which varies depending on the taxpayer's income and the holding period of the property.

Capital Gains Tax

The tax applied to the profit (capital gain) realized from the sale of an investment property. 1031 Exchanges provide a method to defer capital gains tax.

Capital Improvement Exchange

A specialized exchange strategy where the exchanger makes capital improvements to the replacement property to achieve like-kind status.

Commercial Property

Real estate used for business or investment purposes, such as office buildings, retail centers, or industrial properties.

Concurrent Transfer

The simultaneous transfer of both the relinquished property and the replacement property in a 1031 Exchange.

Constructive Receipt

The act of taking possession or control of exchange funds before the exchange is completed, which can disqualify a 1031 Exchange.

Contingency

A condition that must be met for the 1031 Exchange to proceed, often included in the exchange agreement.

1031 Exchange Timing

The strict timeframes that must be adhered to in a 1031 Exchange, including the identification period and exchange period.