As with any specific area of real estate law, tax deferred exchanges under IRC §1031 have their own language, which may be confusing to those who are unfamiliar with these transactions. As always, your friendly and knowledgeable Vesta professional is just a phone call away!

For your convenience, here are some of the exchange terms and phrases that are often used with their "Plain-English" translations.

Adjusted Basis The original basis plus improvement costs minus the depreciation of the property.   Boot Any assets received from an exchange that is not "like-kind." The most common types are "Cash Boot" and "Mortgage Boot." All Boots are taxable. Reciept of boot will not disqualify an exchange, but the boot will be taxes to the Exchanger to the extent of the recognized gain.   Cash Boot Any cash an exchangor receives upon the closing of the relinquished property is taxed.   Constructive Receipt A term that refers to the Exchangor having unrestricted control of the equity from the property sold. Constructive Receipt will invalidate an exchange.   Equity The proceeds from the sale of a property.   Exchange Period The 180-day window in which the Exchangor has to complete an exchange.   Exchangor The owner of the investment property looking to make an exchange.   Fair Market Value The likely selling price as defined by the market at a specific point in time.   Identification Period The time period that begins upon the close-of-escrow of the relinquished property. During this 45-day period, the exchangor must identify the replacement property.   Like-Kind Property The properties involved in an exchange must be similar in nature or characteristics.   Original Basis The purchase price of a property. It is used to calculate capital gains or losses for tax purposes.   Personal Property Any property belonging to the Exchangor that is non-real estate related.   Phase I The process in which the relinquished property is sold and all respective paper work for that process are done. This process is also known as the "down-leg" of the exchange process.   Phase II The process in which the replacement property is bought and all the respective paperwork for that process are done. This process is also known as the "up-leg" of the exchange process.   Qualified Intermediary A third party that helps to facilitate the exchange. Sometimes referred to as "facilitator," or "accommodator."   Relinquished Property The property that you sell when making an exchange.   Replacement Property The property that you acquire when making an exchange.