Adjusted Basis - The original basis plus improvement costs minus the depreciation of the property.
Boot - Any assets received from an exchange that is not "like-kind."
The most common types are "Cash Boot" and "Mortgage Boot." All Boot is Taxable.
Cash Boot - Any cash an exchangor receives upon the closing of the relinquished property is Taxed.
Constructive Receipt - A term that refers to the Exchangor having unrestricted control of the equity from property sold. Constructive Receipt will invalidate an exchange.
Equity - The proceeds from the sale of a property.
Exchange Period - The 180-day window in which the Exchangor has to complete an exchange.
Exchangor - The owner of the investment property looking to make an exchange.
Fair Market Value - The likely selling price as defined by the market at a specific point in time.
Identification Period - The time period that begins upon the close-of-escrow of the Relinquished Property. During this 45-day period, the Exchangor must identify the Replacement Property.
Like-Kind Property - The properties involved in an Exchange must be similar in nature or characteristics.
Original Basis - The purchase price of a property. It is used to calculate Capital Gains or losses for tax purposes.
Personal Property - Any property belonging to the Exchangor that is non-real estate related.
Phase I - The process in which the Relinquished Property is sold and all respective paper work for that processes is done. This process is also known as the "down-leg" of the Exchange process.
Phase II - The process in which the Replacement Property is bought and all the respective paperwork for that process is done. This process is also known as the "up-leg" of the Exchange process.
Qualified Intermediary - A third party that helps to facilitate the Exchange. Sometimes referred to as "facilitator," or "accommodator."
Relinquished Property - The property that you sell when making an Exchange.
Replacement Property - The property that you acquire when making an Exchange.
Reverse Exchange - An Exchange where the Exchangor acquires or gains control of the Replacement Property before disposing of the Relinquished Property.
Simultaneous Exchange - Also referred to as a concurrent Exchange. A simultaneous Exchange is an Exchange transaction where the Exchangor transfers out of the Relinquished Property and receives the Replacement Property at the same time.
Transfer Tax - A tax usually assessed by a city or county on the transfer of property. It may be based on equity or value. When structuring a multi-party Exchange an Exchange agreement will usually call for direct deeding to eliminate additional transfer tax.