Capital Gains
Capital gains are the results of a rise in the value of a capital assets (investment or real estate) that gives it a higher worth than the purchase price. Capital gains are not realized until assets are sold. Capital gains…
Capital Gains Tax
Tax that is applied by the IRS to profits realized from an investment of capital. Each state also their own rate of taxation in addition to federal taxes.
Credit Tenant
A credit tenant is tenant that has received an investment grade rating by one of the three major credit agencies; Fitch, Moody’s, or Standard & Poor’s. An investment grade rating is seen as a good sign that the tenant will be able to pay rent in the…
Defer Capital Gains
A transaction or situation which causes the taxes on the profits of gains made on a capital investment to be deferred to a later date.
Deferred Exchange
A deferred exchange occurs when a property with a capital gain is sold and replaced with a like-kind property using a 1031 exchange to defer the payment of any capital gains tax owed.
DST (Delaware Statutory Trust)
A Delaware Statutory Trust (DST) is a separate legal entity under Delaware law. When structured for a 1031 exchange, the Trust owns the property and each investor is entitled to receive a pro rate share of property income and depreciation…
Equity
The use of the term equity in real estate investing refers to the amount of capital contributed by the owners or the difference between a company’s total assets and its total liabilities.
Exchange
Relinquishing or selling one property and replacing it or buying another is an exchange.
Holding Period
An investment’s holding period is the amount of time between the purchase and sale of an asset.
Intermediary
An entity recognized by the IRS to act as the ‘middleman’ in a 1031 exchange. The intermediary receives funds from the relinquished property, disburses funds for the replacement property, and coordinates all paperwork
1031 Exchange Rules
- Property must be like-kind real estate
- Real estate must be used for investment or business, and not be considered stock in trade or personal property
- Property replaced must be of equal or greater value to the property being relinquished
- Boot must not be received by the seller
- Title of the relinquished property and the replacement property must be in the same taxpayer name
- Replacement property must be identified within 45 days of closing on the sale of the relinquished property
- Replacement property must be purchased within 180 days of closing on the sale of the relinquished property.