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A disposition refers to the sale or relinquishment of the property that the owner is looking to exchange. The 1031 exchange, also known as a like-kind exchange or a Starker exchange, allows an investor to sell a property and reinvest the proceeds in a new property while deferring all capital gain taxes.

In the exchange process, the property being sold is often referred to as the “relinquished property” or “disposed property.” The disposition of the initial property initiates the exchange process, with the owner aiming to identify a like-kind property within 45 days and complete the purchase of the new property (also known as “replacement property”) within 180 days, in order to fully take advantage of the tax deferment offered by Section 1031 of the Internal Revenue Code.

It’s important to note that the entire 1031 exchange process has strict guidelines and timelines that must be adhered to in order to defer the capital gains taxes.