AJAX progress indicator
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  • accelerated cost recovery system (ACRS)
    A U.S. federal tax break used for property placed into service between 1981–1986. ACRS allowed taxpayers to depreciate income-generating assets on shorter schedules based on cost recovery. It was replaced by MACRS, or modified accelerated recovery system.
  • accelerated depreciation
    A method that depreciates a fixed asset at a fast rate early in its useful life, thereby reducing the amount of taxable income in the early life of an asset, and deferring tax liabilities.
  • accomodator
    Also called a Qualified Intermediary, Exchange Accommodator, or Exchange Facilitator, this third party serves the crucial function of holding legal title to either the relinquished or replacement property until the relinquished property can be sold.
  • actual receipt
    Referring to the physical possession of the exchange proceeds or any other property, which the IRS forbids taxpayers to receive in a 1031 exchange.
  • adjusted cost basis
    The cost of an asset after making adjustments for improvements and tax benefits.
  • after-tax return
    The amount an investment returns after all tax liabilities are deducted.
  • alternative minimum tax (AMT)
    A supplemental income tax enacted by the IRS to ensure that wealthy taxpayers paid their fair share of taxes. AMT, at 26% and 28% rates, runs parallel to standard taxes, but has a different tax structure and eliminates many deductions.
  • asset
    Anything you own that has monetary value.
  • asset allocation
    The process of balancing the risk and reward of your investments by spreading, or diversifying them across a range of asset categories.
  • asset class
    A group of investments, such as equity securities (stocks), fixed-income securities (bonds), and real estate, that have similar characteristics and are generally governed by the same rules and regulations.
  • balancing the exchange
    In a 1031 exchange, a taxpayer must balance the exchange of property so there is no little or little-recognized gain. This is done by acquiring replacement property that is the same or of greater value than the relinquished property, reinvesting all net equity, and replacing debt on the(...)
  • basis
    In U.S. tax law term, the amount a property is worth for tax purposes, calculated from the original cost of the property minus expenses related to the acquisition of the property.
  • bond
    A promise of debt to be paid by the bond issuer to the bondholder, within an agreed upon timeframe and with interest specified.
  • boot
    The taxable cash or other non-like-kind property you give in a tax-deferred, like-kind exchange.
  • built-to-suit exchange
    An exchange in which an accommodator acquires and makes improvements to a replacement property during the 180 calendar day exchange period.
  • business asset
    Property or equipment held by or used exclusively or primarily in a business.
  • capital assets
    Property and investments, such as stocks and bonds, that you own.
  • capital gain tax
    The federal and state government's tax on profit made from the sale of an asset.
  • capital gains and losses
    The difference between your basis and the amount you get when you sell an asset.
  • capital improvements
    An addition or alteration to property that adds to its value. According to the IRS, a real property capital improvement includes: Fixing a defect or design flaw Creating an addition, physical enlargement or expansion Creating an increase in capacity, productivity or efficiency (...)
  • capitalization rate
    Also known as a "cap rate," the potential rate of return on a real estate investment determined through a simple formula: net operating income divided by market value (sales price) of the asset.
  • cash equivalents
    Short-term investments that have a maturity of three months or less, and are therefore readily and easily converted into cash.
  • concurrent exchange
    Also known as a simultaneous exchange, a tax deferred exchange where the sale of the relinquished property and the purchase of the replacement property happen at the same time or in close proximity to each other.
  • constructive receipt
    In this violation of IRS 1031 code limitation, the purchaser or purchasing agent gains control of the exchange proceeds during the exchange period.
  • cooperation clause
    Language added to a contract to prevent any dispute or misunderstandings and typically stating  that buyer or seller intends to conduct a 1031 exchange and that the rights in the interest will be assigned to a qualified intermediary.
  • cost basis
    Also known as basis, in U.S. tax law, the amount a property is worth for tax purposes, calculated from the original cost of the property minus expenses related to the acquisition of the property.
  • deduction
    An item or expense subtracted from gross income, estate, or gift that lowers the amount subject to income tax.
  • deferred exchange
    The sale of relinquished property and the acquisition of like-kind property in a tax-deferred, like-kind transaction that follows the rules and regulations defined in Section 1031 of IRS tax code.
  • delayed exchange
    A like-kind exchange that includes a delay or period of time between the close and transfer of the relinquished and replacement properties.
  • depreciable property
    Assets which can be depreciated, so that the value of the asset is considered a business expense over the life of the asset. According to the IRS, in order to be depreciated, an asset must: Be property you own Be used in your business or income-producing activity Have a(...)
  • depreciation
    An accounting method that gradually converts the cost of an asset into an operational expense by taking into account the asset's lowering of value over time due to use, wear and tear, or obsolescence.
  • depreciation recapture
    The gain received from the sale of depreciable property that must be reported to the IRS as income.
  • dividend
    The distribution of a proportionate amount of earnings to a class of shareholders that is decided by the board of directors.
  • exchange account
    The account that will hold exchange funds and other amounts delivered by the exchanger to a qualified intermediary.
  • exchange agreement
    The written agreement between the exchanger and the qualified intermediary. It defines each party's roles and responsibilities, as well the restrictions on the exchange proceeds during the exchange period, and establishes the exchanger's intent to complete a like-kind exchange.
  • exchange funds
    Proceeds received by the exchanger from the transfer of the relinquished property in accordance with the relinquished property contract.
  • exchange period
    The time period during which the taxpayer must identify, purchase, and close on a replacement property in a like-kind exchange, which is 180 calendar days from the sale of the relinquished property, or the due date (including extensions) of the taxpayer's tax return for the year in which the(...)
  • exchanger
    Also known as taxpayer, the person or business entity who is performing the 1031 exchange.
  • excluded property
    Properties that the IRS considers ineligible for 1031 exchange, including property held for personal use, such as a primary residence, and property held primarily for sale.
  • fair market value
    An estimate of the value of a property, based on what a knowledgable buyer and seller would agree to, neither having pressure to either buy or sell.
  • fractional interest
    A share in the ownership of real estate.
  • identification period
    The time period of 45 calendar days that a taxpayer has to identify potential replacement properties after closing the sale of the relinquished property.