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 may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.

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 event of an economic downturn.

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 deductions. The IRS recognizes each investor’s ownership as if they owned an undivided interest in the underlying real property. The size of each investor’s ownership interest in the DST is proportional to the amount invested in relation to all other investors

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

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