1031 glossary
The whole 1031 vocabulary, in plain words.
24 terms every 1031 investor runs into — each explained simply, with why it matters and where to go next.
General education — not tax or legal advice. This explains how §1031 exchanges work in general terms and uses simplified assumptions. Rules and tax rates change and your situation is specific. Talk to a qualified CPA or tax attorney before you rely on any of it. See our full terms & legal notice.
- Like-Kind PropertyReal property held for investment or business use that can be swapped for other such real property, tax-deferred.
- Deferred ExchangeThe standard 1031 structure: you sell first, then buy the replacement within the 45/180-day deadlines.
- Qualified Intermediary (QI)The neutral third party who holds your sale proceeds so you never take receipt of the cash.
- Relinquished PropertyThe property you sell to start the exchange — the "old" property.
- Replacement PropertyThe property you buy with the proceeds to complete the exchange — the "new" property.
- 45-Day Identification RuleYou have 45 calendar days from closing to formally identify your replacement property in writing.
- 180-Day Exchange RuleYou have 180 calendar days from closing to complete the purchase of your replacement property.
- Identification RulesThe written rules for naming replacement candidates by day 45 — including how many you may list.
- 3-Property RuleYou may identify up to three replacement properties, of any value, and buy any or all of them.
- 200% RuleYou may identify any number of properties, as long as their combined value is under 200% of what you sold.
- 95% RuleA fallback: identify unlimited properties of any value, but you must actually acquire 95% of that total value.
- BootAny non-like-kind value you receive — cash or debt relief — that becomes taxable in the exchange.
- Constructive ReceiptIf you have the right to control or access the sale proceeds, the IRS taxes them — even if you never spend them.
- EscrowThe segregated, protected account where your exchange proceeds are held between the sale and purchase.
- FBO (For Benefit Of)How an exchange escrow account is titled so the funds are clearly held for you, not owned by the QI.
- Adjusted BasisWhat you have invested in a property for tax purposes: purchase price, plus improvements, minus depreciation.
- Capital Gains TaxThe federal (and often state) tax on the profit from selling an investment property — what a 1031 defers.
- Depreciation RecaptureTax on the depreciation you previously deducted — taxed at a higher rate than ordinary capital gains.
- Reverse ExchangeYou buy the replacement property first, before selling the old one — held by a special titleholder.
- Improvement ExchangeExchange proceeds are used to build or improve the replacement property before you take it back.
- Delaware Statutory Trust (DST)A trust that owns real estate and lets you buy a fractional interest that qualifies as 1031 replacement property.
- Tenants-in-Common (TIC)Direct fractional co-ownership of a property, where each owner holds a deeded percentage interest.
- Triple-Net Lease (NNN)A lease where the tenant pays taxes, insurance, and maintenance — popular as passive 1031 replacement property.
- Opportunity ZoneA separate capital-gains deferral program — NOT a 1031 — that reinvests gains into designated distressed areas.
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