1031 Exchange Terms you
Need to Know

Step-Up in Basis

When property is inherited, the recipient's tax basis in the property is adjusted to the property's fair market value at the time of inheritance, potentially reducing or eliminating capital gains tax.�

Substantial Improvement

A requirement in opportunity zone investments, where the investor must make substantial improvements to the property to qualify for tax benefits.

Tax-Deferred Exchange

Another term for a 1031 Exchange, where capital gains tax on the sale of a property is deferred to a future date.

Third-Party Administrator (TPA)

A professional or entity that administers and oversees investment assets, often involved in the compliance of 1031 Exchanges.

Title Company

A company that provides title insurance and conducts real estate closings, playing a role in ensuring the legality of property transfers in a 1031 Exchange.

Boot

Any non-like-kind property or cash received by the investor during the exchange. Boot is subject to capital gains tax.

Triple Net Lease (NNN)

A lease agreement in which the tenant is responsible for property expenses, including property taxes, insurance, and maintenance, providing stable rental income.

Boot Deferral

A strategy to defer the tax on boot received in a 1031 Exchange by investing it in like-kind property, potentially reducing immediate tax liabilities.