§ 1031 FAQS & Terminology

• Exchanger: The entity or taxpayer performing an exchange.
• Relinquished Property: Sometimes also referred as "Exchange Property", this is the property that the taxpayer is selling or will be disposing of to purchase or acquire the replacement property.
• Replacement Property: The property that the taxpayer will acquire (roll into) as a result of the exchange.
• Qualified Intermediary: A person or entity who assists the exchanger to effect a tax-deferred exchange by preparing the necessary agreements, holding the exchange proceeds in an unconditional escrow account and acting as the principal in the sale of the relinquished property and the purchase of the replacement property. The intermediary cannot be the taxpayer, a related party or an agent of the taxpayer.
• Constructive Receipt: Under the 1031 regulations, the Exchanger must not have control over the exchange proceeds or property during the exchange period. Constructive Receipt occurs in an exchange when a taxpayer has the unrestricted right to access cash or boot, whether or not such right is exercised, and regardless of whether there is actual or physical receipt of the cash or boot. Any cash or boot received by the exchanger will cause recognition of gain and may disqualify the exchange.
• Boot: "Boot" received by the taxpayer is the money or the fair market value of "other property" received by the taxpayer in an exchange.
  Money includes all cash equivalents plus liabilities of the taxpayer assumed by the other party, or liabilities to which the property exchanged by the taxpayer is subject.
  "Other property" is property that is non-like-kind, such as personal property received in an exchange of real property, property used for personal purposes, or "non-qualified property." "Other property" also includes such things as a promissory note received from a buyer (Seller Financing).

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