Reference
The 1031 & DST glossary
Every term you'll encounter in a 1031 exchange, defined in plain English.
1
- 1031 Exchange
- A transaction under IRC Section 1031 that lets an investor defer capital gains tax by reinvesting the proceeds from selling an investment property into a like-kind replacement property. Learn more →
- 180-Day Exchange Period
- The window — 180 calendar days from the relinquished-property sale (or your tax-filing deadline, if earlier) — by which the replacement purchase must close. Learn more →
4
- 45-Day Identification Period
- The window — exactly 45 calendar days from the sale of the relinquished property — within which you must formally identify your replacement property(ies) in writing. No extensions. Learn more →
7
- 721 Exchange / UPREIT
- A transaction that contributes real estate (often via a DST) into a REIT's operating partnership for OP units, deferring gain but generally ending future 1031 eligibility. Learn more →
A
- Accredited Investor
- An individual meeting SEC income (>$200k single / $300k joint) or net-worth (>$1M excluding primary residence) thresholds, or holding certain licenses. Required to invest in DSTs and most private real estate offerings.
- Adjusted Basis
- Your original cost plus capital improvements, minus depreciation taken. Gain is roughly the sale price minus adjusted basis and selling costs.
B
- Boot
- Any non-like-kind value you receive in an exchange — cash left over or debt relief not replaced. Boot is taxable to the extent of your gain. Learn more →
C
- Cap Rate
- A property's net operating income divided by its price — a quick gauge of unleveraged yield and relative pricing.
- Capital Gains Tax
- Tax on the profit from selling an appreciated asset. Long-term federal rates are 0/15/20%, often plus the 3.8% NIIT and state tax. Learn more →
D
- Delaware Statutory Trust (DST)
- A legal entity that holds title to real estate and lets multiple investors own fractional beneficial interests treated as like-kind property for 1031 purposes. Learn more →
- Depreciation Recapture
- The portion of gain attributable to depreciation deductions, taxed at a federal rate up to 25%. A 1031 exchange defers it along with the rest of the gain. Learn more →
L
- Like-Kind Property
- For real estate, almost any real property held for investment or business use is like-kind to any other — e.g. an apartment building for raw land or a DST interest.
- Loan-to-Value (LTV)
- The ratio of debt to property value. DSTs often carry modest, non-recourse leverage that you may need to match to avoid mortgage boot.
M
- Mortgage Boot
- Taxable boot created when the debt on your replacement property is less than the debt you paid off — unless you offset it with additional cash. Learn more →
N
- NIIT (Net Investment Income Tax)
- An additional 3.8% federal tax on investment income, including capital gains, for higher-income taxpayers. Deferred within a 1031 exchange.
O
- Opportunity Zone (QOZ)
- A federally designated area where investing realized gains into a Qualified Opportunity Fund defers the gain and can make post-investment appreciation tax-free after 10 years. Learn more →
Q
- Qualified Intermediary (QI)
- An independent third party that holds the sale proceeds and facilitates the exchange. You cannot touch the funds yourself or the exchange fails. Learn more →
R
- Reg D 506(c)
- The SEC exemption most DSTs use to raise capital — it permits general solicitation but requires verification that all investors are accredited.
- Relinquished Property
- The property you sell at the start of a 1031 exchange.
- Replacement Property
- The like-kind property you acquire to complete the exchange — which can be a DST interest.
- Reverse Exchange
- An exchange in which you acquire the replacement property before selling the relinquished one, using an Exchange Accommodation Titleholder. Learn more →
S
- Sponsor
- The real estate firm that acquires, packages, and manages the property inside a DST or fund offering.
- Step-Up in Basis
- When heirs inherit property, its basis resets to fair market value at death — potentially erasing the deferred 1031 gain entirely. Learn more →
- Swap Till You Drop
- The strategy of chaining 1031 exchanges across a lifetime so gains are deferred until death, when a step-up in basis can eliminate them. Learn more →
T
- Tenants-in-Common (TIC)
- A co-ownership structure giving each investor a direct, deeded fractional interest in a property; an alternative 1031 replacement structure to a DST. Learn more →
- Triple-Net Lease (NNN)
- A lease in which the tenant pays property taxes, insurance, and maintenance, leaving the owner a largely passive income stream. Learn more →