Resources & Learning Center
A 1031 Exchange has its own vocabulary and its own rules. Use this as a reference alongside a conversation with us — not instead of one.
Glossary of Key Terms
Taxpayer (Same-Taxpayer Rule)
The taxpayer who sells the Relinquished Property must be the same taxpayer who buys the Replacement Property. A tax-disregarded entity you own — like a revocable trust or single-member LLC — can count as the same taxpayer
Relinquished Property
The property you currently own and are selling as part of the exchange.
Like-Kind Requirement
Both properties must be real property held for business or investment use — broader than it sounds.
Identification Period
The 45 calendar days from your closing date to identify Replacement Properties in writing.
Boot
Cash, debt reduction, or non-like-kind property received in the exchange — and taxable.
Qualified Intermediary (QI)
An independent party who holds your exchange proceeds and facilitates the 1031 process. It cannot be your attorney, CPA, real estate agent, or family member.
Replacement Property
The property you acquire as part of the exchange.
Exchange Proceeds
The net sale proceeds from your Relinquished Property, held by the QI until reinvested.
Closing Period
The 180 calendar days from the closing date of the Relinquished Property you have to close on the purchase of your Replacement Property. The 180-day deadline can end sooner. Your exchange must close by Day 180 or by the due date of your tax return for the year you sold (including extensions), whichever comes first.
More about "Like-Kind" Property
"Like-kind" refers to the nature of the property, not its quality or grade. Almost all real property held for business or investment purposes is like-kind to other real property held for business or investment — you could exchange an apartment building for raw land, a warehouse, or a duplex.
Since the 2017 Tax Cuts and Jobs Act, only real estate qualifies — personal property like equipment or vehicles no longer does. U.S. property can only be exchanged for other U.S. property.
More about "Boot"
Boot is anything of value you receive that isn't the Replacement Property. Most commonly leftover Exchange Proceeds, or mortgage debt that isn't replaced, but it could also be any non-like-kind property included in the exchange. To fully defer your capital gains tax, reinvest all your Exchange Proceeds and replace all your debt. Any boot you receive is taxable, even within an otherwise valid exchange.
Identification Rules at a Glance
You must meet one of these rules:
Three-Property Rule
Identify up to three Replacement Properties, no limit on the combined Fair Market Value of the properties.
200% Rule
Identify any number of properties, as long as their combined Fair Market Value doesn't exceed 200% of the sales price of the Relinquished Property.
95% Rule
Identify any number of Replacement Properties, regardless of their combined Fair Market Value, provided you acquire at least 95% of the total Fair Market Value of the identified properties
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