1031 Exchange Glossary
ADJUSTED BASIS:
Basis of the property, adjusted for depreciation and capital improvements.
BASIS: Purchase price of the property.
CASH BOOT: Cash received by the taxpayer from the exchange transaction. Cash boot is taxable.
EXCHANGER: The taxpayer. The person or entity selling the relinquished property and buying the replacement property.
QUALIFIED INTERMEDIARY ("QI"): The entity that creates the safe harbor necessary to qualify the sale and purchase as a 1031 exchange. The Code requires a written agreement between the QI and the taxpayer which limits the taxpayer's right to receive or control the proceeds of the sale of relinquished property. Certain related parties do not qualify to act as QI, including anyone who has acted as a taxpayer's employee, accountant, attorney, broker, etc., within a 2-year period prior to the exchange transaction.
RELINQUISHED PROPERTY: The property the taxpayer is selling.
REPLACEMENT PROPERTY: The property the taxpayer is buying.
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1031 EXCHANGES
