Many clients are perplexed by the specific terminology and concepts used by Qualified Intermediaries. The following is a list of these items, and a brief explanation of their meaning:

Accommodating Titleholder (AT)

Also known as an Exchange Accommodation Titleholder (EAT), this is the entity or party that accommodates the taxpayer by holding the title of a Parked Property when executing a reverse, construction or leasehold exchange.

Adjusted Basis

The adjusted basis of a property is calculated as follows: the original purchase price of the property, plus the cost of capital improvements, less depreciation or cost recovery deductions.

Boot

Property which the taxpayer receives in an exchange which does not qualify as like-kind property, and is therefore subject to taxation. Cash proceeds are the most common form of boot.

Capital Gain

Gain from the sale of real property is taxed as capital gain, which is calculated as follows: total sale price of the Relinquished Property, less exchange expenses, less the Relinquished Property’s adjusted basis.

Depreciation Recapture

Investment property may be depreciated over time, pursuant to various provisions within the Internal Revenue Code, with such depreciation taken as a deduction against income tax. Upon the sale of the Relinquished Property, the depreciation that was previously deducted is recaptured and subsequently taxed.

Parked Property

Property acquired by the AT as part of a reverse, construction, or leasehold exchange. The Parked Property will eventually become the Replacement Property in a successful exchange transaction.

Qualified Intermediary

The functionary that converts the sale and acquisition of like-kind property from a taxable event to a tax-deferred exchange by ensuring the transaction conforms to the IRS regulations. The QI may also be referred to as the intermediary, facilitator, accommodator, or qualified escrow holder.

Relinquished Property

The property that is sold by the taxpayer as part of a 1031 exchange transaction.

Replacement Property

The property that is acquired by the taxpayer as part of a 1031 exchange transaction.

Taxpayer

The entity or party engaging in the exchange transaction. Also referred to as the client, exchanger or investor.

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