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Glossary of Like-Kind Exchange Terms

Adjusted Basis. The original basis plus any capital improvements that may have been made to the property less any depreciation taken. Subtract this matter from the selling price to calculate the amount of gain.

Basis. The original purchase price of the property.

Business Assets. (aka tangible and intangible personal property.) Non-realty property business assets fall under a much stricter like-kind requirement. Assets are divided first between depreciable (tangible) assets and non-depreciable (intangible and collectible) assets.

Boot. Cash and/or non-like-kind property received by the taxpayer in the exchange - includes, but not limited to, mortgage or debt relief.

Capital Asset. Any property owned by an owner used in a trade or business or held for investment, including real estate, and tangible and intangible assets. See Section 2 for those assets that are excluded from the definition of capital asset or are specifically excluded from Section 1031.

Closing Costs. Costs paid at the closing for the relinquished or replacement properties.

Constructive Receipt. Refers to the owner having unrestricted control of the proceeds from the relinquished property. Constructive receipt of proceeds by an owner will invalidate a 1031 exchange.

Delayed Exchange. An exchange where the selling of the relinquished property and the purchase of the replacement property does not take place at the same time.

Depreciable Assets. (used in a trade or business.) Depreciable classes are divided into two major divisions, like-class or like-kind, such as:
a. 13 classes of the most commonly used business assets, such as transportation assets; and
b. All other depreciable assets are seperated by SIC/NAISC code.

EAT (Exchange Accommodation Titleholder). The party that takes title to either the relinquished property or the replacement property in an exchange under Rev. Proc. 2000-37.

Exchange Expenses. Expenses related to the exchange or sale of property.

Gain. The difference between the adjusted basis in the property and the gross selling price, less direct selling expenses.

Held for Business. Assets that are used in the operation of a business.

Held for Investment. Assets that are purchased and held for appreciation.

Non-Depreciable Assets. Non depreciable assets are divided into two groups:
a. Collectibles, such as artwork; and
b. Intangible assets, such as patents, copyrights, trade names, trademarks. These assets are divided
into product and asset classes. Intangible assets must relate to the same type of underlying asset to
which the property sold related.

Owner. The owner of the relinquished property and the future replacement property.

Real Property. Any type of real estate is like-kind to other real estate. Real property is all considered within one class of assets. 

Relinquished Property. The property the owner will be selling in the exchange.

Replacement Property. The property to be received by the owner in the exchange.

Reverse Exchange. An exchange that occurs in reverse order of a forward exchange, as the replacement property is bought and held by the EAT and then the relinquished property is sold - OR - taxpayer can transfer title to the relinquished property to the EAT and simultaneously acquire the replacement property.

Simultaneous Exchange. Simultaneous exchange of property between the taxpayer and seller.

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