The adjusted basis is equal to the purchase price, plus capital improvements, less depreciation.

In an exchange, any funds not used to purchase the replacement property are considered boot, as well as the fair market value of any non-qualified (not “like-kind”) property received in the exchange, such as cash, notes, furniture, supplies, or reduction in debt obligations.

 

The Exchangor pays taxes on the boot to the extent of recognized capital gain.

A Qualified Intermediary as defined in the Internal Revenue Service Treasury Regulations.

At the direction of the Qualified Intermediary (“QI”), title is conveyed directly to the ultimate owners without the QI actually having to be in the chain of title, thus avoiding the imposition of additional transfer tax.

Time allowed for the Exchangor to acquire the replacement property in a delayed exchange, or the time allowed to dispose of the relinquished property, in a reverse exchange. In a delayed exchange, the time period begins on the day the relinquished property is transferred, or the exchangor relinquishes control of the property.

 

It ends on the earliest of the 180th day after the transfer, or if no extension is applied for, then on the day the Exchangor’s tax return is due.

The property owner(s) seeking to defer capital gain tax by utilizing a 1031 Exchange.

Within 45 days after the close of the relinquished property, the replacement property must be identified in accordance with one of the three adopted rules.

Refers to the nature or quality of the property the Exchangor gives up or receives in the exchange, such as real property for real property. Real property does not have to be similar in use, such as raw land for raw land. Raw land may be exchanged for any other real property that will be used in a trade or business or held for investment.

 

 

Real Property located in the United States and Real Property located outside the United States are not like kind.

Property sold by the Exchangor in a 1031 Exchange; also referred to as the First Leg.

Property purchased by the Exchangor in a 1031 Exchange; also referred to as the Second Leg.