Glossary of Terms

1031 Exchange (aka like-kind exchange)

1031 Exchange is a method of deferring capital gains taxes on the sale of real estate held for investment purposes by exchanging proceeds from the sale of such asset, into like-kind property of equal or greater value that is held for investment purposes, as defined in IRC Section 1031. 

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180-Day Exchange Period

180-day exchange period is defined under IRC Section 1031, which states that an exchanger or taxpayer executing a delayed exchange has 180 calendar days from the closing date of the sale

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200% Rule

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date

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45-Day Identification Period

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their

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721 UPREIT Exchange

721 UPREIT exchange results in the same tax deferral benefits that are achieved as with a 1031 exchange. Capital gains taxes are deferred until such time as the exchanger sells 

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95% Rule

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their

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Absolute Triple Net Lease

Also known as a bondable lease, the most extreme form of NNN Lease, in which the tenant is responsible for all property related risks. 

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Accommodator

An independent person, company, or entity that enters into a written agreement with the exchanger to facilitate the transfer of proceeds

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Actual Receipt

Actual receipt is physical possession of, exchange proceeds or other property by an exchanger completing a tax-deferred like-kind exchange.

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Adjusted Basis

Adjusted basis is the original purchase price of an asset plus its acquisition costs plus any capital improvements less the cumulative depreciation deductions

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Appreciated Property

Appreciated property is a property that has increased in value over time. This increase can occur for a number of reasons including increased demand or weakening supply,

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Appreciation

Appreciation is the increase in the value of an asset over time, which can be affected by a number of factors such as increased demand, weakening supply, or changes in inflation.

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Basis

Basis, in the context of commercial real estate, is an asset’s basis is the original purchase price or cost of investment property plus any out-of-pocket

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Beneficial Interest

A beneficial interest, typically referred to in manners concerning trusts,  is the right to receive benefit from assets held by another party. 

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Beneficiary

Beneficiary is any person who is eligible to receive distributions from a trust, will, or life insurance policy.

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Boot

Boot, although not specifically defined (or even mentioned) in IRC Section 1031, is commonly used and refers to the fair market value of cash,

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Broker Dealer

Broker dealer is a person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction.

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Capital Asset

Capital assets, for corporations and business entities, are assets that have a useful life longer than one year and are not held for sale in the ordinary course of business.

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Capital Gain

Capital gain is an increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the basis of the asset. Capital gains can also

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Capital Gains Tax

Capital gains tax is tax payable on capital gains realized from the sale of a capital asset. Capital Gains Taxes are assessed by the federal government in the United States

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Concurrent Exchange

Concurrent exchange refers to a method of executing a tax deferred exchange (aka 1031 exchange or like-kind exchange) where the sale of the relinquished property

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Condemnation

Condemnation is the seizure of property by a public authority for a public purpose. Condemnation typically occurs when a taxpayer owns property in a place

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Constructive Receipt

Constructive receipt is direct access to tax-deferred like-kind exchange funds or other property by an exchanger completing a tax-deferred like-kind exchange.

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Deferred Gain

In a tax-deferred exchange, the deferred gain is the amount of gain that escapes current taxation and is deferred until a later date.

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Delaware Statutory Trust (DST)

A separate legal entity created as a trust under Delaware state laws. Despite the name, neither the property nor the investor need to be located

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Delayed Exchange

Delayed exchange refers to a method of executing a tax deferred exchange (aka 1031 exchange or like-kind exchange) in which the exchanger or taxpayer sells

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Depreciation

Depreciation, in our context, refers to the allocation of an asset’s cost over the timeframe of its “useful life”, or duration for which it will be useful

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Depreciation Recapture

Depreciation recapture is the USA Internal Revenue Service (IRS) procedure for collecting income tax on a gain realized by a taxpayer when the taxpayer disposes of an asset

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DST Interests

DST Interests represent equity ownership in a large property by multiple investors through an investment structure known as a

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DST Sponsor

A DST Sponsor is a person or entity that creates a Delaware Statutory Trust (DST) to hold real property asset(s) and arranges for the issuance of

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Equity Interests

Equity Interests are ownership interest in a business entity, from the concept of equity as ownership. 

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Escrow Agent

Escrow agent is an entity that has fiduciary responsibilities in the transfer of property from one party to another. The escrow agent acts as a custodian of

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Escrow Funds

Escrow funds are capital held by a neutral entity in an account for the benefit of the parties of a financial arrangement whereby the funds are distributed only after certain

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Exchange Accommodation Titleholder (EAT)

Used when completing a reverse exchange, an Exchange Accommodation Titleholder (EAT) is an unrelated party who holds legal title to either

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Exchange Accommodator Titleholder (EAT)

For Exchange Accommodator Titleholder see Accommodator.

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Exchange Agreement

A written agreement between the exchanger and the Qualified Intermediary defining the transfer of the relinquished property, the ensuing purchase

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Exchange Period

Exchange period, under IRC Section 1031, is when an exchanger or taxpayer executing a delayed exchange has 180 calendar days from the closing date of the sale

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Exchange Proceeds

Exchange proceeds are cash proceeds from a transfer of relinquished property held in a qualified escrow account set up by a qualified intermediary whereby the funds

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Exchanger

Exchanger is the taxpayer or owner of the property or properties being exchanged during a tax deferred exchange (aka 1031 exchange or like-kind exchange).

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Form 8824

Form 8824 is a form to be filled out with an exchanger’s tax return in order to report the completion of a 1031 like-kind exchange to the IRS.

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Grantee

Grantee is one to whom the grant is made. The recipient who will be taking title, as named in the legal document used to transfer the real estate. 

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Grantor

A grantor is the person or entity making the grant. For example, if Alice sells her property to Bob, then Alice would be the Grantor.

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Held for Investment

Properties held for investment purposes can be any property or asset that are acquired and held for income production (rental or leasing activities) or

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Holding Title

Holding title refers to the legal structure in which title to real property is owned. In the sale of real property, the title must be transferred from the seller to the buyer

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Identification Period

Identification period, under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their

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Independent Trustee

Independent trustee is a trustee who is not related to the beneficiary of the trust and does not stand to inherit any property under the trust.

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Institutional-Grade Property

While not a precisely defined term, an institutional-grade, or institutional-quality property generally refers to a property of sufficient size and stature to

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Intermediary

Intermediary is an entity that acts as the middleman between two parties in a financial transaction.
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Lease Termination Fee

Lease termination fee is a payment made by the tenant or resident to the landlord in order to legally end a lease early and not be held liable for the remaining time.

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Leasing Commissions

Fees paid to real estate agents in connection with leasing space at a property.  Leasing commissions may be due to a “tenant rep” which is an

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Like-Kind Exchange

A method of deferring capital gains taxes on the sale or disposition of an asset held for business or investment purposes by exchanging the asset,

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Like-Kind Property

Upon the sale of an investment property, capital gains may be deferred by completing a 1031 exchange provided that the investor purchases

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Limited Liability Company (LLC)

Limited liability company is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

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Limited Partnership

Two or more investors who pool their money to develop or purchase income-producing properties. In a limited partnership, each limited partner's

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Master Lease

The primary lease that controls other sub-leases and may cover more property than all sub-leases combined.

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Master Tenant

Tenant which is party to direct lease with the property owner which subsequently sub-leases all or a portion of the property to other occupants.

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Partial 1031 Exchange

To the extent less than 100% of the proceeds of a relinquished property are reinvested, the difference will result in mortgage boot and/or cash boot.

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Personal Property

A type of property which, in its most general definition, can include any asset other than real estate. The distinguishing factor between personal

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Qualified Intermediary

A Qualified Intermediary, also known as a 1031 exchange accommodator, is an independent person, company, or entity that enters into a written agreement with the exchanger to facilitate the transfer of proceeds. The transfer moves the proceeds from the buyer of the relinquished property to the exchanger, and from the exchanger to the seller of the replacement property to effect a tax deferred exchange under IRC Section 1031.

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Real Estate Equity

Real estate equity is the difference between the current fair market value of a property and the amount of debt owed against the property.

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Realized Gain

Realized gain is the amount of gain that the investor made from the sale of an asset. It is calculated as the net sales price received (sales price of the asset less any

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Recognized Gain

Recognized gain is the taxable portion of realized gains arising from the sale of an asset or assets. Recognized gains are typically less than realized gains due to

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Regulation D Offering

A Regulation D Offering is a Securities and Exchange Commission (SEC) regulation governing private placement exemptions that allows companies to raise capital through

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Related Parties Transaction

Related parties transaction is a business deal or arrangement between two parties who are joined by a personal or other relationship prior to the deal.

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Relinquished Property

In a tax deferred (aka 1031 exchange or like-kind) exchange, the property being sold or disposed of is referred to as the relinquished property.

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Replacement Property

Replacement property, during a tax deferred (aka 1031 exchange or like-kind) exchange, is the property being purchased or acquired.

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Replacement Property Interests (RPI)

Replacement Property InterestsTM is the term Realized uses to describe equity ownership in large properties by multiple 1031 exchange investors through Delaware Statutory Trusts (DST) and Tenant-In-Common (TIC)

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Reverse Exchange

A reverse exchange Refers to method of executing a tax-deferred exchange (aka 1031 exchange or like-kind exchange) in which the exchanger or taxpayer acquires the

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Safe Harbor

Safe harbor is a statutory or regulatory provision that provides protection from a penalty or liability. In the context of a 1031 exchange, safe harbor refers to any one of

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Seasoned DST Interest

Previously owned equity interests in a 1031 exchange-qualified Delaware Statutory Trust (DST) whose properties have at least twelve (12) months 

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Signatory Trustee

A signatory trustee is the individual who will be managing the Delaware Statutory Trust (DST). The Sponsor of the DST typically serves as the Signatory Trustee.

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Stated Rent

Stated rent is the rent amount paid by the occupant to the landlord as specified in the lease. Stated rent does not account for any concessions or landlord costs

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Step-Up In Basis

When a taxpayer bequeaths an asset to a beneficiary upon death, the beneficiary’s tax basis in the asset is “stepped up” to the fair market value of

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Tax Basis

Tax basis, in the context of commercial real estate, is the original purchase price or cost of an investment property plus any out-of-pocket

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Tax Deferred

Tax deferred is an instance where investment earnings such as interest, dividends, or capital gains accumulate tax-free until the payment of taxes related to the

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Tenant-In-Common (TIC) Investments

Any syndicated investment created through a Tenant-In-Common (TIC) structure. Under a Tenant-In-Common structure, each investor

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Tenant-In-Common (TIC) Properties

Tenant-in-common properties are any property purchased by multiple investors via a Tenant-In-Common structure. See Tenant-In-Common Investments.

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Tenants-In-Common (TIC)

Tenants-In-Common is a type of shared ownership of property, where each owner owns a share of the property. Unlike in a joint tenancy, these shares can be of unequal size,

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Three Property Rule

The Three Property Rule is defined under IRC Section 1031, which states that an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of

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UPREIT

An Umbrella Partnership Real Estate Investment Trust (UPREIT) is a partnership formed between the owner of appreciated real estate and a

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