Glossary of terms

Boot Any property received in an exchange that is not considered “like-kind” to the property sold. This amount may be subject to tax.
Delayed Exchange Exchange where Relinquished Property is sold to one party  followed by the purchase of Replacement Property from a different party within the 180-day exchange period.
EAT Exchange Accommodating Title Holder.  This refers to the special purpose entity formed by the Intermediary to facilitate a reverse exchange.
Exchange Agreement Written agreement between Investor and IES that meets the requirements of Internal Revenue Code Section 1031.  The Exchange Agreement must be signed prior to or at the closing on the Relinquished Property.
Exchange Expenses New definition of Exchange Expenses:
Transactional costs deductible in connection with the Exchange that should generally include costs that are:
  • A direct cost of selling real property, which typically include:
    • Real estate commissions
    • Title insurance premiums
    • Closing or escrow fees
    • Legal fees
    • Transfer taxes and Notary fees
    • Recording fees- or –
  • Costs specifically related to the fact the transaction is an exchange such as the Qualified Intermediary fees.

Costs related to obtaining the loan are not considered Exchange Expenses and should not be deducted from the Exchange Proceeds. Other non-exchange expenses include:

  • Mortgage points and assumption fees
  • Credit reports
  • Lender’s title insurance
  • Prorated mortgage insurance
  • Loan fees and loan application fees
  • Property taxes
  • Utility charges
  • Association fees
  • Hazard insurance
  • Credits for lease deposits
  • Prepaid rents and security deposits

Exchange ProceedsNet equity received by Investor from the sale of the Relinquished Property.  This amount represents the Investor’s equity after payment of mortgages and Exchange Expenses.  The Exchange Proceeds are transferred to the Intermediary at the closing of the Relinquished Property and thereafter transferred from the Intermediary to the closing on the Replacement Property.IESInvestor Exchange Services, Inc., a full service qualified intermediary.IntermediaryCompany selected by Investor to assist in facilitating the exchange.  The Intermediary will prepare all the necessary paperwork for the exchange and hold the Exchange Proceeds.Improvement ExchangeExchange where Investor wants to utilized some of the Exchange Proceeds to make improvements to the Replacement Property or where Investor needs improvements to the Replacement Property in order for the Replacement Property to be of greater value than the Relinquished Property.InvestorTaxpayer that holds title to the Relinquished Property and wants to initiate the exchange.QEAAQualified Exchange Accommodation Agreement.  Written agreement between the EAT and Investor in connection with a reverse exchange.Relinquished PropertyInvestment or business property that is being sold by Investor as part of the exchange.Replacement PropertyInvestment or business like-kind property being acquired by Investor as part of the exchange.Reverse ExchangeExchange where Investor must acquire the Replacement Property prior to the sale and closing of the Relinquished Property.