Cash Flow
Cash flow is the income generated by an investment property after operating expenses and other property costs are paid. NASIS describes investment real estate as potentially providing current income through monthly cash flow in addition to long-term appreciation potential.
Capital Gains Tax Deferral
Capital gains tax deferral refers to postponing the recognition of taxable gain that would otherwise result from the sale of an investment property. In a properly structured 1031 exchange, this allows an investor to preserve more equity for reinvestment into replacement property.
Core Plus
Core Plus generally refers to an investment strategy focused on relatively stable properties that may offer modest upside through improved operations, leasing, or market conditions. These properties often carry somewhat more risk than “core” assets, but less risk than heavier value-add opportunities.
Cooperation Clause
A cooperation clause is language added to a purchase and sale agreement stating that the buyer or seller agrees to cooperate with the other party’s 1031 exchange at no additional liability or cost. This clause is commonly included in both the relinquished property sale contract and the replacement property purchase contract.
Constructive Receipt
Constructive receipt occurs when a taxpayer has access to or control over funds, even if the money is not physically in hand. In a 1031 exchange, the exchanger must avoid constructive receipt of sale proceeds in order to preserve tax-deferred treatment.
