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1031 Exchanges - Say What? Terminology Part #2

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Services for Real Estate Pros with Asset Preservation

 1031 Exchange Terminology Part #2

 

MORTGAGE BOOT: This occurs when the Exchanger does not acquire debt that is equal to or greater than the debt that was paid off on the relinquished property sale; Referred to as "debt relief". This creates a taxable event.

 

QUALIFIED INTERMEDIARY: The entity who facilitates the exchange; Defined as follows: (1) Not a related party (i.e. agent, attorney, broker, etc.) (2) Receives a fee (3) Receives the relinquished property from the Exchanger and sells to the buyer (4) Purchases the replacement property from the seller and transfers it to the Exchanger; Asset Preservation, Inc. (API) is a "Qualified Intermediary."

 

RELINQUISHED PROPERTY: Property given up by the Exchanger; Also referred to as the sale, exchange, ‘downleg' or ‘Phase I' property.

 

REPLACEMENT PROPERTY: Property received by the Exchanger: Also referred to as the purchase, target, ‘upleg' or ‘Phase II' property.