Commercial real encyclopedia from A - Z

D

Deferred or Delayed Exchange

(Also known as a Forward Exchange) This occurs when the Relinquished property is sold and the Replacement property is purchased within 180 days following the sale of the Relinquished Property.
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Depreciation

A decrease or loss in value, because of age, wear or market conditions.
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E

Equity

The value of a person’s ownership in real property or securities, less the amount of any existing liens on it.
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Exchange Period

Once escrow closes on the relinquished property, the investor has the lesser of 180 days from the date of closing or the date on which the investor’s tax return for the year the relinquished property was sold is due, to close the purchase transaction and complete the exchange. For exchanges closing in the final quarter of the year, the taxpayer will need to get an extension to file his or her tax return to get the full 180 days.
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Exchanger/Exchangor

(Also known as the taxpayer) The person or entity completing the tax-deferred exchange.
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G

Growth Factor

Interest earned on the exchange proceeds while held by the Qualified Intermediary (QI).
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I

Identification Period

The investor has 45 days from the closing of the relinquished property to identify a replacement property. Proper identification of replacement property is a requirement for a valid exchange, and the investor can only acquire property that has been properly identified during the 45-day identification period.
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L

Like-Kind Property

In the context of real estate, like-kind exchanges are valid between and among several different types of investment properties, including bare land, commercial property, industrial buildings, retail stores, apartments, duplexes—even leasehold interests exceeding 30 years. Personal property exchanges are much more restrictive than real property exchanges with regard to the interpretation of like-kind or like-class.
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P

Personal Property

Tangible or intangible property that can be “owned’ and is not classified as real property or real estate. Examples of tangible property: airplanes, livestock, farm equipment, art, coins Examples of intangible property: copyrights, radio and television broadcasting licenses, franchise licenses
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Q

Qualified Intermediary

(Also known as QI, Intermediary, Accommodator or Facilitator) A non-disqualified party who handles the exchange transaction pursuant to section 1031 of the IRC
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R

Relinquished Property

(Also referred to as the Downleg or Phase 1 Property) The property being sold by the taxpayer.
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Replacement Property

(Also referred to as the Upleg or Phase 2 Property) The property being acquired by the taxpayer.
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Reverse Exchange

(Also referred to as a Parking Arrangement) Occurs when an investor wants to acquire replacement property prior to the closing of the relinquished property. How this happens: The Exchange Accommodation Titleholder (EAT) takes title to the replacement property and “parks” it, allowing the taxpayer to transfer the relinquished property to a third-party buyer.
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S

Safe Harbor

An IRS provision that gives a taxpayer protection as long as the requirements to comply with the code are met.
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Seller

The party who owns the property that the taxpayer plans to acquire.
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Simultaneous Exchange

Also known as a Concurrent Exchange) An exchange when the sale and purchase are concurrent.
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Starker

Name of the taxpayer in the U.S. Court of Appeals case that authorized delayed exchanges.
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