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
Phase 2 (Up Leg)
The term “up leg” refers to the property that an investor is acquiring. A 1031 exchange, also known as a like-kind exchange, allows investors to defer capital gains taxes when they sell a property and… Read More
Portfolio Interest
Portfolio Interest is a type of interest that is exempt from U.S. federal income tax when received by a foreign person (non-U.S. investor). It is typically derived from specific investment types, like loans or debt… Read More
Principal Residence Exception
The Principal Residence Exception refers to a tax advantage or relief that is part of Section 121 that is given to individuals when they sell their primary or principal residence. Principal Residence Exception is a… Read More
Qualified Escrow Account
A Qualified Escrow Account in the context of the 1031 exchange industry is a specialized account used to hold the funds from the sale of a relinquished property temporarily, ensuring that the funds are secure… Read More
Qualified Exchange Accommodation Agreement
A Qualified Exchange Accommodation Agreement (QEAA) is a legal and contractual arrangement utilized within the framework of Section 1031 of the Internal Revenue Code, which allows for the deferral of capital gains taxes on the… Read More
Qualified Use
The Qualified Use term refers to the utilization of real estate in a manner that is suitable and aligns with the regulations and requirements stipulated by Section 1031 of the Internal Revenue Code (IRC). The… Read More
Qualifying Property
A Qualifying Property in the context of a Section 1031 exchange, also known as a like-kind exchange, refers to a specific type of real estate property that meets the necessary requirements to be eligible for… Read More
Real Estate Exchange
A Real Estate Exchange refers to the process where an investor can defer paying capital gains taxes on the sale of an investment property by reinvesting the proceeds from the sale into a like-kind property… Read More
Real Property
A 1031 exchange, also known as a like-kind exchange, is a strategy used in the United States that allows an investor to defer paying capital gains taxes on the sale of an investment property by… Read More
Realized Gain
A Realized Gain refers to the difference between the sale price of a relinquished property and its adjusted basis. The 1031 exchange, named after Section 1031 of the U.S. Internal Revenue Code, allows property owners… Read More
Recognized Gain
In the context of U.S. tax law and specifically in relation to a 1031 exchange, recognized gain refers to the amount of gain that is subject to taxation. Here’s a more detailed breakdown: 1031 Exchange:… Read More
Related Party
In a 1031 exchange and Qualified Opportunity Funds (QOFs), the term related party refers to individuals or entities that have a close relationship with the taxpayer, such that transactions between them may not be considered… Read More
TIC Terms
Title
A title refers to legal ownership or the right to possess and use a property. It’s an essential concept in the real estate investment industry because it represents a person’s or entity’s legal right to… Read More
Title Insurance
Title insurance is a specialized type of insurance that plays a critical role in the real estate investment industry. When a person invests in real estate, they essentially purchase the legal ownership, or “title,” of… Read More
Title Search
Title Search refers to the thorough examination of public records to confirm a property’s legal ownership and find out if any claims, defects, liens, or encumbrances affect the title. The primary purpose of a title… Read More
Trustee
In the realm of real estate investments, particularly involving Tenancy in Common (TIC) and Delaware Statutory Trust (DST) structures, as well as 1031 exchanges, the term trustee carries significant responsibilities. The trustee is typically an… Read More
Undivided Interest
In real estate, an undivided interest refers to a situation where two or more individuals share ownership of a single piece of property. This concept is commonly associated with a form of co-ownership known as… Read More
Unity Of Possession
In the context of property law, Unity of Possession is one of the traditional four unities required to establish a joint tenancy, alongside unity of interest, unity of title, and unity of time. However, it… Read More
Warranty Deed
In real estate, specifically within the Tenants in Common (TIC) investments, a Warranty Deed is a legal document that is used to transfer ownership of property. This type of deed provides the grantee (the person… Read More