1031 Exchange Terminology
Accommodating Titleholder (AT) – Also known as an Exchange Accommodation Titleholder (EAT), this is a disregarded entity or party that accommodates the taxpayer by holding the title of a parked property when executing a reverse, construction, or leasehold exchange. Typically, we form it and our holding company is the sole member for the duration of the exchange period. The taxpayer will acquire the replacement property at the end of the exchange by accepting an assignment of the sole membership interest of the AT/EAT.
Adjusted Basis – The adjusted basis of a property is calculated as follows: the original purchase price of the property, plus the cost of capital improvements, less depreciation or cost recovery deductions. The tax deferral will not begin until the value of the replacement property exceeds the adjusted basis in the relinquished property.
Boot – Property which the taxpayer receives in an exchange which does not qualify as like-kind property and is therefore subject to taxation. Cash proceeds are the most common form of boot.
Capital Gain – Subject to certain requirements, generally, the gain from the sale of real property is taxed as a capital gain, which is calculated as follows: total sale price of the relinquished property, less exchange expenses, less the relinquished property’s adjusted basis.
Parked Property – Property acquired by the AT as part of a reverse, construction, or leasehold exchange. The parked property will eventually become the replacement property in a successful exchange transaction.
Qualified Intermediary (QI) – The functionary that converts the sale and acquisition of like-kind property from a taxable event to a tax-deferred exchange by ensuring the transaction conforms to the IRS regulations. The QI may also be referred to as the intermediary, facilitator, accommodator, or qualified escrow holder.
Relinquished Property – The property that is sold by the taxpayer as part of a 1031 exchange transaction.
Replacement Property – The property that is acquired by the taxpayer as part of a 1031 exchange transaction.
Target Replacement Value (TRV) – equivalent to the net sale price of the relinquished property, it is the minimum replacement property value a taxpayer must purchase in order to maximize the tax deferral under 1031.
Taxpayer – The entity or party engaging in the exchange transaction.
Also referred to as the client, exchangor or investor.
Strategic 1031 Exchange Advisors, LLC, a Georgia limited liability company, is a qualified intermediary for 1031 exchanges only. It is not an accounting firm, law firm or registered investment professional and therefore is not qualified to give accounting, tax, legal or investment advice, and, further, cannot act in an agency capacity on behalf of its clients. This website is for informational purposes only and does not and is not intended to constitute accounting, tax, legal or investment advice. We advise you to consult with your accountant, attorney and investment professional on all matters related to your exchange.