1031 Reverse Exchange

1031 Exchange Glossary

Section 1031 of the Internal Revenue Code allows for non-simultaneous exchanges of investment property in the event escrows cannot be closed concurrently for the exchanged properties. The following are terms which are frequently used in connection with an exchange transaction.

1031 Exchange Agreement

The agreement between the Exchangor and the Accommodator.

1031 Exchange Period

The period during which the Exchangor must acquire the replacement property in the exchange. This period starts on the day the Exchangor transfers the relinquished property and ends on midnight on the 180th day thereafter, or the due date including extensions of the Exchangor’s tax return for the year of the transfer of the relinquished property.


An Independent Third Party (a qualified intermediary) who enters into an agreement with the Taxpayer (Exchangor) to transfer the relinquished property from the Taxpayer to the Buyer. The Accommodator holds the proceeds of the relinquished property until they are invested in the replacement property. At that time the Accommodator transfers title to the replacement property from the Seller to the Exchangor. The Accommodator cannot be the Exchangor’s agent.


Anything of value not reinvested in like-kind property such as cash, mortgage notes, notes, or other securities. The Exchangor pays taxes on the part of the exchange considered "boot", to the extent of recognized capital gain.

Charitable Remainder Trust

A Charitable Remainder Trust (CRT) is a tax-exempt irrevocable trust designed to reduce taxable income by first dispersing income to the beneficiaries of the trust for a specified period of time and then, when that time frame expires, donating the remainder of the trust to a designated charity.

Constructive Receipt

It is considered "constructive receipt" if the Exchangor has control over the proceeds of the relinquished property. This applies even though he did not receive the funds, but it was possible for him to receive them.

Deferred 1031 Exchange

The Exchangor transfers property held for productive use in a trade or business or for investment (relinquished property) and at a later time receives like-kind property (replacement property). The Exchangor does not have control of the funds during the 1031 exchange and receives only a deed for a deed.

Direct Deeding

The Accommodator does not have to take title to the properties in the 1031 exchange. The Accommodator can instruct the closing agent to deed directly from the Exchangor to the Buyer and from the Seller to the Exchangor.


The Taxpayer or the Entity - person, partnership, or corporation - that accomplishes a tax deferred 1031 exchange.

Identification Period

The period during which the Exchangor must identify the replacement property to be acquired. This period starts on the day the Exchangor transfers the relinquished property and ends on midnight on the 45th calendar day thereafter.

Like Kind Property

Property that is of the same character or nature, such as real property for real property. It does not have to be similar in use, such as an apartment building for an apartment building. One can be 1031 exchanged for many or many for one.

Realized Gain

Amount realized from a transaction over the adjusted basis of the property.

Recognized Gain

Amount reported for income tax purposes as a capital gain. It is limited to the lesser of the gain realized or the amount of boot received.

Related Parties

A Related Party is defined as a linear member of a family or a corporation in which 10% or more is owned or controlled by the Exchangor. If a Related Party is involved in the 1031 exchange, the property must have been and be held for two years by both parties.

Relinquished Property

The original sale property, or that which is owned when the Exchangor chooses to enter into a 1031 exchange.

Replacement Property

The property the Exchangor is acquiring in the 1031 exchange.

Reverse 1031 Exchanges

When the replacement property is acquired before the relinquished property can be sold.

Reverse Mortgage

A Reverse Mortgage is a home equity loan available to seniors (62 and over in the United States, 60 for some private lenders), that can be received in one lump sum or multiple payments. The loan is repaid by the homeowner when the owner dies, the home is sold, or the owner leaves for more then 12 consecutive months.

Structured Sale

A special type of installment sale known as a structured sale, where some or all of the gains from the sale of appreciated assets are deferred as proceeds are received over time. However, instead of the buyer guaranteeing the periodic payments, the buyer pays cash, and the obligation to pay the seller is transferred to a third party assignment company, such as Downstream Structured Sales Company.

Timing Requirements

The replacement property must be identified by the 45th day from the close of escrow of the relinquished property and must be transferred by the 180th day from the close of escrow of the relinquished property.

The above information is provided for general information purposes only. You should discuss your actual individual property transaction with your current attorney, certified public accountant or us.

We hope you find the above information helpful. We are aware that you will have questions about your individual transaction and encourage you to e-mail, call us at (800) 743-1031 or FAX us at (626) 796-8222. We will be pleased to assist you.