1031 Exchange Terms you
Need to Know

Real Estate Agent

A licensed professional who assists individuals in buying and selling real estate properties, including investment properties involved in 1031 Exchanges.

Real Property

Tangible, fixed assets, including land and structures, which qualify for 1031 Exchanges.

Related Parties

Individuals or entities with a close relationship to the exchanger, such as family members, business partners, or controlled entities. Special rules apply to exchanges involving related parties.

Relinquished Property

The property an investor intends to sell as part of the 1031 Exchange.

Replacement Property

The property an investor intends to acquire in a 1031 Exchange to replace the relinquished property.

Replacement Property Rules

IRS regulations that dictate the requirements for replacement properties in a 1031 Exchange, including like-kind and value requirements.

Basis Allocation

The process of allocating the tax basis of the relinquished property to the replacement property in a 1031 Exchange, which can affect future depreciation and tax liability.

Residential Property

Real estate used for dwelling purposes, such as single-family homes, condos, or apartment buildings.

Reverse Exchange

A 1031 Exchange in which the replacement property is acquired before the relinquished property is sold. It involves specific procedures and compliance with IRS regulations.

Safe Harbor

A provision in the tax code that provides guidelines and protection for taxpayers to ensure compliance with IRS regulations regarding 1031 Exchanges.

Simultaneous Exchange

A 1031 Exchange in which the relinquished property and the replacement property are exchanged on the same day.

State Income Tax

Income tax imposed by individual states, which may affect the overall tax implications of a 1031 Exchange.