Glossary
This glossary provides clear definitions for common terms related to 1031 exchanges, DSTs, TICs, and other real estate investment strategies. It is designed to help investors quickly understand the language used throughout the exchange process and when reviewing potential replacement property options.
If you are researching tax-deferral strategies or comparing passive investment solutions, the definitions below can serve as a useful reference. Our goal is to make industry terminology easier to understand so you can move forward with greater clarity and confidence.
1031 Terms
1031 Exchange Account
A 1031 exchange account is the account used to hold proceeds from the sale of a relinquished property during a 1031 exchange. Instead of the seller receiving the money directly, the funds are typically placed… Read More
1031 Exchange Buyer
A 1031 exchange buyer is the person or entity acquiring replacement property as part of a 1031 exchange transaction. In most cases, this is the exchanger who sold a relinquished property and is now reinvesting… Read More
45-Day Period
The 45-Day Period is a critical part of the process. This period refers to the time frame in which the investor, after selling the original (relinquished) property, must identify the potential replacement properties they plan… Read More
Accommodator
In a 1031 exchange, which is a swap of one investment property for another that allows capital gains taxes to be deferred, an Accommodator is also known as a Qualified Intermediary (QI). The Accommodator plays… Read More
Acquisition Cost
In the 1031 exchange industry, Acquisition Cost refers to the total amount of capital required to take ownership of a replacement property. This cost typically includes the purchase price of the property itself along with… Read More
Acquisition Period
In a 1031 exchange, which is a strategy used in the United States to defer capital gains tax on the sale of an investment property by reinvesting the proceeds into a like-kind property, the Acquisition… Read More
Actual Receipt
Actual Receipt in the context of the 1031 exchange industry refers to the moment when an exchanger (the taxpayer performing the exchange) physically or constructively takes possession or control of the replacement property during the… Read More
Adjusted Basis
In the context of 1031 exchanges, the adjusted basis is a key concept used to determine the capital gains or losses when a property is sold or exchanged. It starts with the original purchase price… Read More
Adjusted Cost Basis
Adjusted Cost Basis refers to the adjusted cost or tax basis of a property that is being sold or exchanged. The adjusted cost basis is the original cost or purchase price of the property plus… Read More
Adjusted Gross Income (AGI)
Adjusted Gross Income (AGI) is a term used in U.S. tax law to describe an individual’s total gross income, minus certain allowable deductions such as contributions to a retirement account or student loan interest payments.… Read More
Balancing the Exchange
Balancing the Exchange refers to the process of ensuring the value, equity, and debt of the property being acquired (replacement property) is equal to or greater than the property being sold (relinquished property). In a… Read More
Bargain Sale
In the context of a 1031 exchange, a bargain sale refers to a transaction in which the seller of real estate or personal property sells the asset to a buyer at a price below its… Read More
TIC Terms
Adjusted Gross Income
Adjusted Gross Income (AGI) is a term that is often used in tax accounting and personal finance, but it can have relevance in the real estate investment industry as well. In the context of taxation,… Read More
After-Tax Cash Flow
After-Tax Cash Flow in the context of the real estate investment industry refers to the amount of net income an investor earns from an investment property after all operating expenses and taxes have been paid.… Read More
Alternative Investment
An alternative investment is a type of investment that falls outside the conventional categories of cash, bonds, or stocks. These are typically used as a means to diversify an investment portfolio and can include assets… Read More
Amortization
Amortization refers to the process of spreading out a loan into a series of fixed payments over time. When it comes to real estate, this typically means a mortgage loan on a property. The payments… Read More
Anchor Tenant
In the real estate investment industry, an anchor tenant is typically a large, well-known business that serves as the main draw to a commercial property, particularly in shopping malls or shopping centers. This tenant often… Read More
Annual Percent Yield
Annual Percent Yield (APY) is a financial concept that’s used broadly in the financial industry, and it can apply to various sectors including real estate investment where the tenants in common (TIC) structure is used.… Read More
Appraisal
Appraisal refers to the formal and systematic process of estimating the value of a property, typically performed by a licensed and certified professional known as an appraiser. The objective of an appraisal is to determine… Read More
Appraised Value
Appraised value holds significant importance in real estate. The appraised value is essentially the estimated market value of a property as determined by a professional, licensed appraiser. This value is established after a thorough examination… Read More
Appreciated Property
Appreciated property refers to a property that has increased in value over time. This increase could be due to a variety of factors, such as improvements made to the property, a general rise in market… Read More
Appreciation
In the real estate investment industry, appreciation refers to the increase in the value of a property over time. This can occur for a variety of reasons, such as general inflation, increased demand, improvements to… Read More
Assessed Value
Assessed Value refers to the dollar value assigned to a property by a public tax assessor for the purposes of taxation. This value is used to determine the property taxes that the owner must pay… Read More
Assessor
An assessor is a professional who determines the value of a property. The main function of an assessor is to carry out a property appraisal, a process that involves estimating the market value of real… Read More
DST Terms
Accredited Investor
In the realm of real estate investment, the term accredited investor holds significant importance, especially when dealing with certain types of investment opportunities that are not available to the general public. The U.S. Securities and… Read More
Accredited Mortgage Trust (AMT)
An Accredited Mortgage Trust (AMT), within the Delaware Statutory Trust (DST) industry, refers to a specific kind of investment vehicle that allows accredited investors to invest in a pool of mortgages. AMTs are typically structured… Read More
Amendment
An amendment refers to a formal change or modification made to a document, such as a lease, contract, or agreement. This change can be relatively minor, such as altering the spelling of a name or… Read More
Annual Report
An Annual Report, as part of a Delaware Statutory Trust (DST), generally refers to a comprehensive report on a trust’s activities throughout the preceding year. As with annual reports in other corporate structures and sectors,… Read More
Beneficiary
The term beneficiary refers to the individual or entity designated by the account or property holder to receive the assets upon the death of the owner. The role of a beneficiary is crucial in estate… Read More
Blue Sky Laws
Blue Sky Laws are state regulations in the United States that were established to protect investors against fraudulent sales practices and activities. These laws, which may vary by state, generally require sellers of new securities… Read More
Board of Trustees
The Board of Trustees in the terms of the Delaware Statutory Trust (DST) industry refers to a group of individuals who hold a fiduciary responsibility to manage the affairs of the trust for the benefit… Read More
Bond
In the context of the real estate investment industry, the term bond typically refers to a type of debt security in which an investor loans money to an entity, such as a corporation or government,… Read More
Breach of Trust
Breach of Trust in the real estate investment industry typically refers to a situation where an individual or organization fails to fulfill their duties or obligations as per a trust agreement. In real estate, trusts… Read More
Business Trust
A Business Trust is a type of unincorporated business organization which operates much like a corporation. The trust is managed by trustees for the benefit of its owners, who are known as beneficiaries. These beneficiaries… Read More
Capital Account
A Capital Account in the context of a Delaware Statutory Trust (DST) industry, much like in other financial and investment contexts, is a ledger that records the equity contribution of each individual trust beneficiary or… Read More
Capital Gain
Capital gain, within the context of the real estate investment industry, refers to the increase in the value of a real estate property or investment over time. This increase in value, when the property is… Read More
REIT Terms
Amortization
Amortization refers to the process of spreading out a loan into a series of fixed payments over time. When it comes to real estate, this typically means a mortgage loan on a property. The payments… Read More
Appreciation
In the real estate investment industry, appreciation refers to the increase in the value of a property over time. This can occur for a variety of reasons, such as general inflation, increased demand, improvements to… Read More
Asset
An asset typically refers to a piece of real estate property that the REIT owns and manages. These assets can include a wide range of property types, such as office buildings, shopping centers, apartments, warehouses,… Read More
Base Rent
In the real estate investment industry, Base Rent refers to the minimum amount of rent that is due under a lease agreement, not including any additional charges or costs that could be incurred. These additional… Read More
Bond
In the context of the real estate investment industry, the term bond typically refers to a type of debt security in which an investor loans money to an entity, such as a corporation or government,… Read More
Building Code
Building codes are sets of regulations that govern the design, construction, alteration, and maintenance of structures. They specify the minimum requirements to adequately safeguard the health, safety, and welfare of building occupants. Building codes play… Read More
Built-To-Suit
Built-To-Suit refers to a method of commercial leasing in which the landlord or developer constructs a building to the tenant’s specifications. In a built-to-suit arrangement, a tenant will generally have significant input into the design,… Read More
Business Trust
A Business Trust is a type of unincorporated business organization which operates much like a corporation. The trust is managed by trustees for the benefit of its owners, who are known as beneficiaries. These beneficiaries… Read More
CAM (Common Area Maintenance)
Common Area Maintenance (CAM) is a critical concept in the real estate investment industry, particularly in the realm of commercial real estate. In a commercial lease, CAM charges are costs that are passed on to… Read More
CapEx
CapEx, short for Capital Expenditures, refers to the funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment. CapEx could be significant repairs or improvements that increase… Read More
Capital Expenses
Capital expenses, often referred to as CapEx, are substantial costs a business incurs to either buy, maintain, or improve its fixed assets such as buildings, vehicles, equipment, or land. In the context of the real… Read More
Capital Gain
Capital gain, within the context of the real estate investment industry, refers to the increase in the value of a real estate property or investment over time. This increase in value, when the property is… Read More
NNN Terms
Absolute Net Lease
An Absolute Net Lease, also known as a “triple net lease” or “NNN lease”, is a type of commercial real estate lease agreement in which the tenant is responsible for all the property’s associated costs.… Read More
Actual Cash Value
The term Actual Cash Value (ACV) often refers to the cost to replace an insured item of property at the time of loss, minus depreciation. It is a method of valuation that insurance companies typically… Read More
Addendum
An addendum refers to an additional document that is attached to the original contract between the buyer and the seller. It can modify, clarify, or override the initial agreement, often providing detailed information on specific… Read More
Anchor Tenant
In the real estate investment industry, an anchor tenant is typically a large, well-known business that serves as the main draw to a commercial property, particularly in shopping malls or shopping centers. This tenant often… Read More
Annual Assessment Period
The term Annual Assessment Period could refer to a specified time frame, usually one year, during which a property’s performance is evaluated or assessed. This might involve looking at factors such as: Return on Investment… Read More
Base Rent
In the real estate investment industry, Base Rent refers to the minimum amount of rent that is due under a lease agreement, not including any additional charges or costs that could be incurred. These additional… Read More
Base Year
Base Year is a term commonly used in commercial leases, especially those with triple net (NNN) lease structures. The Base Year is the first year of a lease agreement, and it sets a benchmark for… Read More
CAM (Common Area Maintenance)
Common Area Maintenance (CAM) is a critical concept in the real estate investment industry, particularly in the realm of commercial real estate. In a commercial lease, CAM charges are costs that are passed on to… Read More
Capital Expenditures
Capital expenditures, often abbreviated as CapEx, are funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment. This type of financial outlay is made by companies to… Read More
Capital Gain
Capital gain, within the context of the real estate investment industry, refers to the increase in the value of a real estate property or investment over time. This increase in value, when the property is… Read More
Capital Gain or Loss
Capital gain or loss in the real estate investment industry refers to the difference in the purchase price and the selling price of real property. A capital gain occurs when you sell a real estate… Read More
Capital Gain Tax
Capital Gain Tax in the context of the real estate investment industry refers to a type of tax that is levied on the profit (the capital gain) realized from the sale of a real estate… Read More
QOF Terms
10-Year Holding Period
The 10-Year Holding Period in the context of the Qualified Opportunity Funds (QOF) refers to the minimum length of time that an investment must be held in a QOF to reap the full benefits of… Read More
180-Day Investment Period
The 180-Day Investment Period for Qualified Opportunity Funds (QOF) refers to the time frame within which a person or entity must invest their capital gains into a QOF in order to qualify for specific tax… Read More
Acquisition Date
The Acquisition Date refers to the date at which a certain asset or property was acquired or purchased by the QOF. The significance of the Acquisition Date arises due to the regulations that govern Opportunity… Read More
Annual Assessment Period
The term Annual Assessment Period could refer to a specified time frame, usually one year, during which a property’s performance is evaluated or assessed. This might involve looking at factors such as: Return on Investment… Read More
Capital Gain Tax
Capital Gain Tax in the context of the real estate investment industry refers to a type of tax that is levied on the profit (the capital gain) realized from the sale of a real estate… Read More
De Minimis Exception
De Minimis Exception is a term used in various contexts within financial and legal industries, including the Qualified Opportunity Fund (QOF) industry. In general, the phrase “De Minimis” is a Latin term that means “about minimal… Read More
Debt Investment
Debt investment refers to an investment strategy where an investor lends money to a property owner, a developer, or a real estate investment fund, and in return, receives a promise of repayment with interest. The… Read More
Deferred Capital Gains
Deferred Capital Gains refer to the postponement of recognizing and paying tax on the capital gains that are accrued when a property is sold for a profit. This deferral is usually achieved through the use… Read More
Dividend
In the real estate investment industry, a dividend refers to a distribution of earnings made by a real estate investment trust (REIT) or a similar type of company to its shareholders. Dividends are usually issued… Read More
Eligible Gain
The term eligible gain plays a crucial role in understanding how investors can potentially defer or even exclude certain capital gains from taxation. Eligible Gain refers to the capital gain or profit that an investor realizes… Read More
Equity Investment
Equity Investment in the context of the Qualified Opportunity Fund (QOF) industry refers to the purchase of ownership shares in businesses, real estate, or other ventures located within designated Opportunity Zones. Opportunity Zones are economically-distressed… Read More
Financial Statements
Financial statements are the formal records of the financial activities of a real estate investment entity. These statements are used by investors, analysts, and other stakeholders to understand the entity’s financial health, the effectiveness of… Read More
IRA Terms
5-Year Rule
The 5-Year Rule for Individual Retirement Accounts (IRAs) refers to a set of guidelines that determine how and when you can withdraw earnings from a Roth IRA without penalties. Here’s a brief overview: Roth IRA… Read More
60-Day Rollover Rule
The 60-Day Rollover Rule is a significant regulation in the Individual Retirement Account (IRA) industry. It pertains to the process of moving funds from one IRA to another, or from an IRA to a qualified… Read More
Active Management
Active Management refers to a strategy where a portfolio manager actively makes investment decisions with the aim of outperforming a specific benchmark or achieving a particular investment objective. This approach contrasts with passive management, where… Read More
Annual Contribution Limit
The Annual Contribution Limit for 401(k) and IRA (Individual Retirement Account) plans refers to the maximum amount of money that an individual is allowed to contribute to their retirement accounts each year. The Internal Revenue… Read More
Annuity
An annuity is a financial product that offers a stream of payments in exchange for an initial investment. It functions as a retirement planning tool, designed to provide a steady income stream to the investor,… Read More
Asset Allocation
In the context of 401(k) and IRA accounts, asset allocation refers to the strategy of dividing your investment portfolio among different asset classes, such as stocks, bonds, and cash equivalents. The purpose of asset allocation… Read More
Backdoor Roth IRA
A Backdoor Roth IRA isn’t an official type of Individual Retirement Account (IRA) but rather a method that taxpayers can use to sidestep the income limits placed on Roth IRA contributions. Traditional Roth IRAs have… Read More
Beneficiary
The term beneficiary refers to the individual or entity designated by the account or property holder to receive the assets upon the death of the owner. The role of a beneficiary is crucial in estate… Read More
Catch-up Contribution
A catch-up contribution is a special provision in retirement savings plans like 401(k)s and Individual Retirement Accounts (IRAs) that allows individuals aged 50 or older to contribute additional funds beyond the standard annual contribution limits.… Read More
Conduit IRA
The term Conduit IRA refers to an Individual Retirement Account (IRA) that is used as a temporary holding account for funds that are being moved from one tax-advantaged retirement plan to another. This type of… Read More
Contribution Limit
The concept of Contribution Limits within the IRA (Individual Retirement Account) industry is an important aspect of retirement planning and tax law in the United States. These limits are established by the IRS and dictate… Read More
Conversion
In the contexts of Delaware Statutory Trusts (DSTs) and Individual Retirement Accounts (IRAs), the term conversion can have multiple meanings depending on the financial processes involved. Here’s a breakdown of how conversion applies to DSTs… Read More
401k Terms
401(k) Plan
A 401(k) plan is a type of employer-sponsored retirement savings plan in the United States. It allows employees to save and invest a portion of their paychecks before taxes are taken out. Taxes aren’t paid… Read More
404(c) Compliance
Section 404(c) of the Employee Retirement Income Security Act (ERISA) provides a specific framework within the 401(k) industry for participant-directed individual account plans, such as 401(k) plans. This framework allows participants to exercise control over… Read More
Annual Contribution Limit
The Annual Contribution Limit for 401(k) and IRA (Individual Retirement Account) plans refers to the maximum amount of money that an individual is allowed to contribute to their retirement accounts each year. The Internal Revenue… Read More
Asset Allocation
In the context of 401(k) and IRA accounts, asset allocation refers to the strategy of dividing your investment portfolio among different asset classes, such as stocks, bonds, and cash equivalents. The purpose of asset allocation… Read More
Automatic Enrollment
Automatic enrollment is a feature used in some 401(k) retirement plans that allows employers to automatically sign up their employees for the 401(k) plan, rather than waiting for the employees to sign up themselves. When… Read More
Beneficiary
The term beneficiary refers to the individual or entity designated by the account or property holder to receive the assets upon the death of the owner. The role of a beneficiary is crucial in estate… Read More
Catch-up Contribution
A catch-up contribution is a special provision in retirement savings plans like 401(k)s and Individual Retirement Accounts (IRAs) that allows individuals aged 50 or older to contribute additional funds beyond the standard annual contribution limits.… Read More
Company Match
Company Match in the context of the 401(k) industry refers to a contribution that an employer makes to their employee’s 401(k) plan based on the employee’s own contributions. It is a common feature of many… Read More
Contribution Rate
The Contribution Rate in the 401(k) industry typically refers to the percentage of an employee’s pay that is contributed to their 401(k) plan. There are two types of contributions that can be made to a… Read More
Default Investment
The concept of a Default Investment in a 401(k) plan is a critical component of modern retirement planning, especially given the rise of automatic enrollment features in such plans. When employees are automatically enrolled in… Read More
Defined Contribution Plan
A Defined Contribution Plan is a type of 401k retirement plan in which an employer, employee, or both make contributions on a regular basis. In most cases, an employee will elect to have a portion… Read More
Distribution
Distribution refers to the process of taking money out of a 401(k) plan. When participants in the plan, who are typically employees, decide to take money out of their accounts, it is known as taking… Read More