Glossary

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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Inclusion Event

An inclusion event occurs when a QOF investor chooses to recognize some or all deferred gains. An inclusion event will occur on the earlier of the occurrence of the event or December 31, 2026, per the Proposed Regulations.
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Income

Income is money or compensation that an individual or business earns in exchange for a product or service. For individuals, income is typically earned via wages, salary or via interest, dividends or capital gains obtained from investment holdings. For businesses, income is the difference between its total revenues and expenses and taxes.

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Income Effect

The income effect is a consumer’s change in spending based on the change in their salary/income and prices of goods. If a consumer’s salary decreases, their spending will decrease. In addition to spending less, the consumer may look for inferior or substitute goods at a lower price. Overall, the net effect is less spending. Also, if a consumer’s salary remains the same but the cost of goods they frequently buy increases, the consumer will look for cheaper alternatives, thus decreasing their overall spending. The opposite effect holds, as well. When a consumer’s salary increases and prices remain the same, they will spend/buy more goods.

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Income Statement

An income statement is one of the key financial statements that firms use to quantify the quality of its performance and operations over a stated period of time. Also known as the profit and loss (P&L) statement, the income statement is primarily concerned with a firm’s revenues and expenses during a fiscal period. An income statement provides a snapshot of a firm’s profitability in a particular fiscal period.

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Income Tax

Income tax is a tax levied by governments on individuals and businesses and serve as a source of revenue for governments that collect them. The Internal Revenue Service (IRS) collects income taxes and enforces the tax code.

The tax code offers individuals and businesses deductions and credits, which mean that most entities do not pay taxes on all income. For example, a taxpayer may earn $70,000 in a year but also be eligible for $15,000 in deductions, which will reduce that taxpayer’s taxable liability to $55,000. Similarly, businesses are able to reduce their tax liabilities by deducting operating and capital expenses.

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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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Index Fund

An index fund is a type of mutual fund or exchange traded fund (ETF) that is constructed to mimic the components of a market index, such as the S&P 500. Index funds are used to achieve broad market exposure, in an effort to reduce risk specific to a particular industry or stock. Index funds allow investors to capture the performance of the stock market in aggregate, instead having to go through the research and guesswork of investing in an individual stocks or industries.

Due to the fact that index fund investments require less effort on behalf of its manager, fees are typically less than more actively managed funds. While index fund expense ratios sit around 0.05% to 0.07%, actively managed funds typically see fees within the 1% to 3% range.*

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Index Funds

An index fund is a mutual fund that mirrors a specific index, such as the S&P 500. In this case, the S&P 500 is called the index funds benchmark. Rather than buying every stock in the S&P 500, an investor can simply purchase an S&P 500 index fund, since index funds contain a similar composition of stocks found in the benchmark index.

Because index funds are passive investments, the investor only needs to buy the fund. They don’t have to worry about managing any of the investments within the fund to match the benchmark. The passive nature of index funds also means their expense ratios are fairly low. Index funds are available to individual brokerage accounts and many retirement accounts.

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Indirect Tax

An indirect tax is paid by the consumer with the purchase of a product. The tax is indirect because the consumer is not paying it directly to the government, as is the case with income taxes. Instead, the consumer pays the tax indirectly as part of their product purchase. Supply chain entities or those selling products collect the tax. It is up to the selling entity to charge the correct amount of tax and submit those taxes to the government. As the price of a product increases, so does the tax paid on it. The tax is levied regardless of income, making it more burdensome to lower-wage earners than those with a higher income.

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Individual Retirement Account (IRA)

An individual retirement account (IRA) is a type of investment tool that individuals use to allocate funds for retirement. There are two predominant types of IRAs: traditional IRAs and Roth IRAs.

Contributions to traditional IRAs are tax-deductible, which allows individuals to claim contributions as a deduction on their tax returns. When the individual withdraws these funds from the account during retirement, these funds are taxed at an ordinary income tax rate.

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Inelastic

A good or service is inelastic when the demand for it is not affected when its prices go up or down. In contrast, an elastic good that has a 10% price increase may also see a 10% drop in demand. This good is said to have a 1:1 ratio in demand and price movements, or an elasticity of 1 or greater. Inelastic goods have an elasticity of less than 1.

If the price of a good or increases, why would a consumer continue buying that good? Why not buy a different good? Unlike elastic goods, inelastic goods do not have substitutes, so consumers have no choice but to buy at a higher price. Inelastic goods consist of medication, cigarettes, electricity, and gasoline.

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Inferior Good

Inferior goods are goods which, due either to relative or actual quality, has the demand for itself decrease as the income levels rise. In other words, inferior goods have a lower price compared to similar goods. In some cases, it can also mean the good is inferior quality. People with lower incomes tend to prefer inferior goods because they are more affordable. Examples of inferior goods vs. normal goods are:

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Infill Location

Infill Location is a real estate development site that exists within a mostly built out market. Usually located within an urban area, infill locations look to fill the few vacant lots that exist between other developments in the area. Infill locations are characterized by having a high level of demand, due to increased property values in desirable locations, with high barriers to entry.

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Inflation

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

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Inflation Rate

Inflation is a percentage measurement of how quickly the price of goods is increasing. It is measured for each country — although regions within a country can experience different rates of inflation. Most countries target 2-3% annual inflation.

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Initial Public Offering

An initial public offering (IPO) is the process that a private company participates in to offer shares of its firm to the public via a stock issuance. An initial public offering provides a firm access to public capital it previously did not enjoy as a private venture. 

The process of going public allows private investors and company founders the opportunity to realize gains on their initial investment in the firm.

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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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Insurable Value

The maximum dollar amount an insurance policy will cover in the event that an insured asset is deemed lost. In real estate, this can include the improvements on the land, as well as the physical property that existed on the property, such as machinery and other equipment. Insurable value is can be a function of the full replacement cost of the property, reproduction cost, or depreciated value. Insurable value is typically less than the market value, as it excludes the value of land.

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Insurance

Insurance is a form of a contract or policy in which an individual or corporate entity exchanges payments for financial protection or reimbursement against losses from the insurer.

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Insurance Premium

An insurance premium is the cost of insurance paid by the insured to an insurance company. The insurance company uses premiums to cover any insurance claims. A certain amount of premiums are also invested to earn additional income for the insurance company. How much an insurance company can keep liquid is state-regulated. Insurance premiums are used with a wide variety of insurance, including health, auto, home, and life.

Insurance premiums can be paid in installments, such as monthly, semi-annually, or annually. As long as the customer continues to pay their premiums, they’ll have coverage. Coverage generally starts with the first premium payment and continues as long as there are no lapses in payment.

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Intangible Property

Intangible personal property is something of individual value that cannot be touched or held.

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Intangible Property Test

In order to qualify as a QOZB, a firm must deploy a substantial portion of its intangible property in the active conduct of a trade in a QOZ, defined as at least 40 percent.
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Interest Economics

Interest can be expressed in three common ways. Two are related — simple and compound. Simple interest is a rate charged on the principle of the loan. It is calculated as simple = principle x rate x periods. The other is compound interest, which calculates interest on the principle and accumulated interest. It is calculated as compound = simple x [(1 + rate)^ time - 1]. Both can be calculated on loans or savings accounts. Compound interest is used more than simple interest.

The third form of interest is the ownership an investor can take in a company. An investor can buy a certain number of shares in a company in exchange for a percentage of ownership equal to the number of purchased shares.

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Interest Expense Deduction

Interest expense deduction is defined as a borrowing expense that a taxpayer can claim to reduce their taxable income. There are many types of interest that can be tax-deductible such as mortgage interest, student loan interest, investment property loan, interest on some business loans.

For example, if an investor has a 30% marginal tax rate and has $10,000 in tax deductible income, they would save $3,000 in taxes. Effectively that $10,000 loan only cost $7,000.

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Interest Rate

The interest rate is the percent of principal charged by a lender for the use of its money. Interest rates are typically expressed on an annual basis, or annual percentage rate (APR). To the borrower, the interest rate is the cost of debt, and to the lender, the interest rate will be the rate of return. Interest rates are reflective of how much risk the lender thinks it is assuming by lending to a particular borrower. Higher interest rates are typically given to entities more susceptible to default, or a lower credit rating.

In addition to credit rating, interest rates are determined by other extraneous factors. This includes the supply and demand for credit, inflation, and monetary policy set by the U.S. Federal Reserve. In situations where a loan is backed by collateral, a borrower may be able to obtain a lower rate than if the property was not secured.

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Interest Rate Risk

Interest rate risk is the risk that an investment's value will change due to a change in the level of interest rates. These changes usually have an inverse effect on

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Interest Rate Swap

An interest rate swap is a forward contract between lender and borrower that trades one stream of future debt service payments with another based on a change in the interest rate on a specified principal amount. This change in interest rate is typically done as an exchange of a floating rate for a fixed rate, or vice versa, in order to reduce the risk of fluctuating short-term interest rates, or potentially pay lower interest payments.

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Interest-Only Loan

Interest-Only loan is a loan in which, for a set period of time, the borrower pays only interest on the principal balance, with the principal balance remaining unchanged.

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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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Internal Rate Of Return (IRR)

Internal rate of return is the discount rate at which the net present value of all cash flows (both positive and negative) from a project or investment equal zero.

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Internal Revenue Service (IRS)

The Internal Revenue Service is the government agency in the United States responsible for the collection of taxes and enforcement of tax law. Founded in 1862 by Abraham Lincoln, the IRS performs the taxation of all American individuals and firms. The IRS operates as a subsidiary government agency under the larger umbrella of the US Department of the Treasury.

 

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International Monetary Fund

The International Monetary Fund (IMF) was created after World War II to promote global economic growth, along with financial stability, encouragement of international trade, and the reduction of poverty. Countries that want to participate in the IMF’s mission need to be a member. There are currently 188 countries that are members of the IMF.

To help mitigate a financial crisis, the IMF makes loans to countries that are experiencing financial difficulty. The IMF also monitors national and global economies. It makes global economic forecasts as well, which are made available in its publication called the World Economic Outlook.

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International Monetary Fund (IMF)

The International Monetary Fund was created in 1945 as part of the Bretton Woods agreement with the mission of promoting global economic growth, financial statement, international trade and reducing poverty across the globe. The IMF currently consists of 189 member countries, each of which have a proportionate number of seats on the executive board by order of the nation’s financial importance. The IMF's mission is “to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”

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Interpersonal Skills

Interpersonal skills are behavioral techniques that an individual employs to properly interact with others. In a professional setting, interpersonal skills are considered an individual’s ability to work well in groups with others. 

Interpersonal skills generally are defined by the person’s knowledge of social expectations. More simply, they are a measure of a person’s ability to communicate effectively with others and adapt as circumstances change.

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Intrapreneur

Intrapreneur is similar to an entrepreneur except that they work within the confines of a larger company. The intrapreneur has access to the company’s resources and doesn’t have to take the same outsized risks that an entrepreneur does. Companies that want to drive innovation will sometimes allow one person or even a group to work with autonomy as if they are their own company within a company. In this way, they are similar to an entrepreneur. The company is hoping that the unrestricted creativity and lack of influence from the larger company will provide the right environment for the next big thing.

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Intrinsic Value

Intrinsic value can have different interpretations for different people. This difference of opinion creates an opportunity for investors. One group of investors might decide that a company’s stock is worth $30 because the CEO was recently put in jail. And so the stock drops from $50 to $30, as those investors sell their shares. However, another group of investors believes the CEO being jailed has little effect on the company, as its financials are still very sound. They believe the stock is still worth $50 and begin buying shares in hopes that the price will increase back to $50.

The above is a type of fundamental quantitative but a subjective one. Discounted cash flow (DCF) is a type of quantitative fundamental analysis that provides a numeric value for a company. However, it doesn’t factor in events such as the CEO going to jail or new competitors entering the market.

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Investment Banking

Investment banking is an institutional-level banking activity provided to large companies, governments, and other entities. It is separate from commercial banking through regulations, although both may be and often are part of the same bank. Investing banking is not open to retail customers, as it does not take in deposits. Instead, it helps with mergers and acquisitions, the raising of capital, taking companies public (i.e., underwriting), and reorganizations. For these activities, investment banks command high fees.

There are two sides to investment banking — buy and sell. The buy side buys securities for mutual funds, pension funds, and more for money management purposes. The sell side creates and promotes securities to the buy side.

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Investment Portfolio

An investment portfolio is a collection of investments that can include stocks, bonds, commodities, and alternatives, among other types of asset classes. Investment portfolios can be held and managed by an individual, or held and managed by a hired financial professional for a fee, based upon the wants and needs of a particular investor.

Investment portfolios are built based upon one’s financial goals and risk tolerance. Catering towards diversification and the management of unsystematic risk in a single investment, building a portfolio of investments across various asset classes may help an investor achieve a desired level of risk-adjusted return.

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Investment Property

Investment property is a broad term for a real estate property that has been purchased with the intention of earning a return on the investment, either through

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Investment Vehicle

Any product used by investors to achieve a positive return on their money, although a favorable return is not guaranteed. Investment vehicles span all asset classes, and include ownership investments, lending investments, cash equivalents, and pooled investment structures such as a mutual fund.

For investors looking to diversify past asset classes as a whole, holding several types of investment vehicles may help further spread risk.* For example, corporate bonds and Treasury Inflation-Protected Securities (TIPS) each allow an investor to put his or her money into a debt instrument, but are subject to different market pressures and risks. Likewise, from a real estate perspective, investment may be made through various investment vehicles including LLCs, Limited Partnerships, REITs, or Delaware Statutory Trusts, with each vehicle having its own set of strengths and risks.

*Diversification does guarantee returns and does not protect against loss.

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Invisible Hand

The invisible hand is a concept discussed in Adam Smith’s 1776 book titled An Inquiry into the Nature and Causes of the Wealth of Nations. The invisible hand exist in free markets. It’s the unforeseen force that allows product and service prices to find their natural equilibrium. This is in contrast to planned economies or those that are heavily government-regulated.

An example of the invisible hand is a product that a seller prices high and is unable to sell. The seller drops the price until people begin buying. Adam Smith would say the invisible hand is at play here. It also works in the other direction. If a product is priced too low, the manufacturer will sell out unless the price is raised. In both cases, supply and demand find equilibrium.

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Qualified Opportunity Zone Partnership Interest

Qualified Opportunity Zone Property also includes certain interests in a partnership, with requirements substantially identical to those applicable to Opportunity Zone Stock but which would apply when the business is organized as a partnership rather than a corporation.

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Swap

Swaps are most used with interest rates. When two companies with loans have different views on where interest rates are going, they may decide to swap their rates with each other. The swap is often executed by using derivatives contracts. Swaps can be used on commodities, currencies, and debt-equity structures.

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Traditional IRA

A retirement account that allows an individual to allocate pretax income toward investments that can grow tax-deferred. Income contributed to the account is limited, and may be deductible from taxable income based on the taxpayers amount of income and filing status. Capital gains taxes or dividend income taxes are only assessed once funds are withdrawn from the account.

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What is a 1031 Exchange?

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What is Investment Property Wealth Management?

Manage risk and help maximize opportunity

Are DST Investments Right For Me?

Are DST Investments Right For Me?