Glossary

Accommodator
The party that acts as an intermediary in the transaction. They are usually a qualified intermediary who assists in like kind exchanges.

Basis
The initial amount paid for a property, plus money spent improving the property, minus depreciation

Benefit
Something other than money a client acquires when making a transaction

Boot
Proceeds from an exchange that are not matched with other like kind property. Money that is not re-invested in like kind is considered "boot" and is taxable.

Capital Gains
Profit derived from the sale of capital assets. Usually it's the difference between the purchase price and the selling price minus certain deductible expenses. The depreciation of a property will increase the gain that is taxable after the sale.

Capital Loss
A loss suffered through the sale or exchange of a capital asset.

Caveat Emptor
Let the buyer beware.

Closing
The time in a real estate transaction when all documents have been executed and the funds have been deposited with Escrow so the documents may be recorded or distributed, and the funds disbursed.

Depreciation
The loss of value of a property brought on by age, deterioration, and other factors.

Equity
The difference between the fair market value of a property, minus any existing liabilities.

Exchange
The act of giving up one thing for a another.

Exchange Period
The time allowed to find a replacement property after the initial property has been relinquished to the accommodator.

Gain
Profit which is usually established by determining the amount the sale price exceeds the adjusted basis in the property.

Identification Period
The time in which the exchanger may search for the replacement property. It begins with the transfer and ends at midnight on the 45th day thereafter.

I.R.C. § 1031
This is the section of the Internal Revenue Code that details the exchange of like kind property.

Like Kind Property
Property eligible for a deferred exchange. Like kind property is similar in use. For example, a property with a rental house on it may be exchanged for an apartment building.

Liquidate
The conversion of property or other assets into money.

Phase I
The first part of the exchange in which the exchanger assigns the right to sell the property to the accommodator. The property is sold, and the proceeds are then held by the accommodator until the replacement property has been identified.

Phase II
The second part of the exchange in which the Exchanger identifies the replacement property to the accommodator. The accommodator then acquires the property and transfers it to the Exchanger, which fulfills the exchange.

Qualified Intermediary
A term used to distinguish between entities operating by a written exchange agreement and those who are acting only as cooperating parties. The qualified intermediary may arrange for direct deeding where the intermediary may not.

Relinquished Property
The property that is exchanged by the Exchanger. This is sold by the accommodator in Phase I of the deferred exchange.

Replacement Property
The property which is identified by the Exchanger, and acquired by the accommodator in Phase II of the deferred exchange.

Useful Life
The period of time that the asset is expected to be useful to the taxpayer.