Glossary of Terms of Art

Where a term is practitioners' shorthand rather than a defined term, the entry says so and describes the treatise's usage. The references in parentheses are to the sections where each term is examined. Definitions are stated as the current authorities state them; applicability dates are addressed in the sections cited.

Actual receipt. A taxpayer is in actual receipt of money or property at the time the taxpayer actually receives the money or property or receives its economic benefit. Actual receipt by the taxpayer's agent, determined without regard to the disqualified person rules, is actual receipt by the taxpayer. Treas. Reg. § 1.1031(k)-1(f)(2). (29.1)

Assignment and notice. An intermediary is treated as entering into an agreement if the rights of a party to the agreement are assigned to the intermediary and all parties to that agreement are notified in writing of the assignment on or before the date of the relevant transfer of property. The rule lets a qualified intermediary step into purchase and sale contracts the taxpayer has already signed. Treas. Reg. § 1.1031(k)-1(g)(4)(v). (24.3, 52.2)

Benefits and burdens of ownership. The judicial inquiry into which party owns property for federal income tax purposes. It decides whether a parking arrangement outside the safe harbor of Revenue Procedure 2000-37 succeeds. (30.5, 30.6, 66.2)

Bona fide intent. (1) For the rules coordinating the qualified escrow account, qualified trust, and qualified intermediary safe harbors with installment reporting, the taxpayer must have a bona fide intent to enter into a deferred exchange at the beginning of the exchange period. The taxpayer has that intent only if it is reasonable to believe, based on all the facts and circumstances as of the beginning of the exchange period, that like-kind replacement property will be acquired before the end of the exchange period. Treas. Reg. § 1.1031(k)-1(j)(2)(iv). (39.5, 44.2) (2) For the reverse exchange safe harbor, at the time qualified indicia of ownership are transferred to the exchange accommodation titleholder, it must be the taxpayer's bona fide intent that the property represent either replacement property or relinquished property in an exchange intended to qualify for nonrecognition under section 1031. Rev. Proc. 2000-37, § 4.02(2). (30.2)

Boot. Practitioners' term for money and other property received in an exchange that is not like-kind property. Gain is recognized, but in an amount not in excess of the sum of the money and the fair market value of the other property. I.R.C. § 1031(b). Liabilities of the taxpayer assumed by the other party, or to which the relinquished property is subject, are treated as money received, subject to the offsetting rules described under Net liability relief. Treas. Reg. § 1.1031(d)-2. (33.1 through 33.3, 34.1, 34.2)

Build-to-suit exchange. See Improvement exchange.

Constructive receipt. A taxpayer is in constructive receipt of money or property at the time it is credited to the taxpayer's account, set apart for the taxpayer, or otherwise made available so that the taxpayer may draw upon it at any time or can draw upon it if notice of intention to draw is given. There is no constructive receipt while the taxpayer's control of its receipt is subject to substantial limitations or restrictions, but constructive receipt occurs when those limitations or restrictions lapse, expire, or are waived. Receipt by the taxpayer's agent is receipt by the taxpayer. Treas. Reg. § 1.1031(k)-1(f)(2). The safe harbors displace these general rules for arrangements that satisfy them. (29.2, Chapter 27)

Deferred exchange. An exchange in which, pursuant to an agreement, the taxpayer transfers property held for productive use in a trade or business or for investment (the relinquished property) and subsequently receives property to be held either for productive use in a trade or business or for investment (the replacement property). The transaction must be an exchange, meaning a transfer of property for property as distinguished from a transfer of property for money. Treas. Reg. § 1.1031(k)-1(a). (24.1)

Delaware statutory trust. An entity formed under title 12, sections 3801 through 3824, of the Delaware Code. Revenue Ruling 2004-86 holds that a Delaware statutory trust on the ruling's facts, including the absence of any power under the trust agreement to vary the investment of the certificate holders, is an investment trust under Treas. Reg. § 301.7701-4(c) that is classified as a trust, and that a taxpayer may exchange real property for an interest in it without recognition of gain or loss if the other requirements of section 1031 are satisfied. Rev. Rul. 2004-86, 2004-33 I.R.B. 191. (6.4, 21.4)

Direct deeding. The practice of conveying the relinquished property directly from the taxpayer to the buyer, and the replacement property directly from the seller to the taxpayer, while a qualified intermediary takes an assignment of the contracts. An intermediary is treated as acquiring and transferring the relinquished property, or the replacement property, if it enters into the agreement for the transfer of that property and the property is transferred under that agreement. Treas. Reg. § 1.1031(k)-1(g)(4)(iv)(B), (C). (24.4)

Disqualified person. A person who may not act as the qualified intermediary, escrow holder, or trustee under the safe harbors. The term includes (1) a person who is the taxpayer's agent at the time of the transaction, which includes a person who has acted as the taxpayer's employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two-year period ending on the date of the transfer of the first relinquished property, disregarding services with respect to section 1031 exchanges and routine financial, title insurance, escrow, or trust services by a financial institution, title insurance company, or escrow company; (2) a person bearing a relationship to the taxpayer described in section 267(b) or 707(b), with 10 percent substituted for 50 percent; and (3) a person bearing such a relationship to a person described in (1), subject to an exception for certain banks and bank affiliates. Treas. Reg. § 1.1031(k)-1(k). Compare Related person. (Chapter 28, 56.1)

Disqualified property. For the rules coordinating the safe harbors with installment reporting, property that is not held for productive use in a trade or business or for investment, or property described in section 1031(a)(2). Treas. Reg. § 1.1031(k)-1(j)(2)(v). (39.5, 44.2)

Drop and swap. Practitioners' term for a partnership's distribution of property to its partners as tenants in common before a sale, so that each former partner may exchange or sell separately. (20.2) Compare Swap and drop.

Dwelling unit. For the safe harbor of Revenue Procedure 2008-16, real property improved with a house, apartment, condominium, or similar improvement that provides basic living accommodations, including sleeping space, bathroom, and cooking facilities. Rev. Proc. 2008-16, § 3.02. (43.5)

Excess basis. In the depreciation regulations, any excess of the section 1031(d) basis of the replacement property over its exchanged basis as those regulations define it (see Exchanged basis). It is depreciated as newly acquired property. Treas. Reg. § 1.168(i)-6(b). (36.1, 39.1)

Exchange accommodation titleholder. The person that holds qualified indicia of ownership of property in a qualified exchange accommodation arrangement. It may not be the taxpayer or a disqualified person, and it must either be subject to federal income tax or, if treated as a partnership or S corporation, have more than 90 percent of its interests or stock owned by partners or shareholders who are subject to federal income tax. Rev. Proc. 2000-37, § 4.02(1). (30.3)

Exchange agreement. The written agreement between the taxpayer and a qualified intermediary under which the intermediary acquires the relinquished property from the taxpayer, transfers the relinquished property, acquires the replacement property, and transfers the replacement property to the taxpayer. Treas. Reg. § 1.1031(k)-1(g)(4)(iii)(B). (52.1)

Exchange first; exchange last. Practitioners' terms for the two sequences of a reverse exchange under Revenue Procedure 2000-37. In an exchange-last arrangement, the titleholder acquires and holds the replacement property until the taxpayer transfers the relinquished property. In an exchange-first arrangement, the titleholder holds the relinquished property until it is transferred to a person who is not the taxpayer or a disqualified person. Rev. Proc. 2000-37, § 4.02(5). (30.4)

Exchange group. In an exchange of multiple properties, a group consisting of properties transferred and received in the exchange, all of which are of a like kind or like class. Each exchange group must include at least one property transferred and at least one property received, and money and property described in section 1031(a)(2) may not be included. Treas. Reg. § 1.1031(j)-1(b)(2)(i). Compare Residual group. (32.1)

Exchange period. The period that begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date, including extensions, of the taxpayer's return for the taxable year in which the transfer occurs. Where relinquished properties in the same exchange are transferred on different dates, the period runs from the earliest transfer. I.R.C. § 1031(a)(3)(B); Treas. Reg. § 1.1031(k)-1(b)(2)(ii), (iii). (26.1 through 26.4)

Exchanged basis. (1) In the Code's general vocabulary, exchanged basis property is property having a basis determined in whole or in part by reference to other property held at any time by the person for whom the basis is to be determined, as replacement property's basis is under section 1031(d). I.R.C. § 7701(a)(44). Compare Substituted basis property; Transferred basis property. (2) In the depreciation regulations, the lesser of the section 1031(d) basis of the replacement property or the adjusted depreciable basis of the relinquished property. Treas. Reg. § 1.168(i)-6(b). (36.1)

Fair market value. For the deferred exchange rules, the fair market value of property without regard to any liabilities secured by the property. Treas. Reg. § 1.1031(k)-1(m). (25.3)

Held for productive use in a trade or business or for investment. The holding requirement that section 1031(a)(1) applies to the relinquished property and, prospectively, to the replacement property. Real property held primarily for sale is excluded. I.R.C. § 1031(a)(1), (2). Unproductive real estate held by one other than a dealer for future use or future realization of the increment in value is held for investment and not primarily for sale. Treas. Reg. § 1.1031(a)-1(b). (Chapters 12 and 13)

Identification. Replacement property is identified only if it is designated as replacement property in a written document signed by the taxpayer and hand delivered, mailed, telecopied, or otherwise sent before the end of the identification period, either to the person obligated to transfer the replacement property or to any other person involved in the exchange other than the taxpayer or a disqualified person, and only if it is unambiguously described. An identification in a written exchange agreement signed by all parties before the end of the period also suffices, and replacement property received before the end of the identification period is treated as identified. Treas. Reg. § 1.1031(k)-1(c)(1) through (3). (25.1, 25.5, 25.7)

Identification period. The period that begins on the date the taxpayer transfers the relinquished property and ends at midnight on the 45th day thereafter. Where relinquished properties in the same exchange are transferred on different dates, the period runs from the earliest transfer. I.R.C. § 1031(a)(3)(A); Treas. Reg. § 1.1031(k)-1(b)(2)(i), (iii). (25.1, 26.3)

Improvement exchange. Practitioners' term, also called a build-to-suit exchange, for an exchange in which replacement property is constructed or improved before the taxpayer receives it. A transfer of relinquished property does not fail to qualify merely because the replacement property is not in existence or is being produced when it is identified. The property received counts only to the extent it is substantially the same as the property identified and, where construction is not complete when the taxpayer receives it, only to the extent it is real property under local law at that time. Treas. Reg. § 1.1031(k)-1(e). (Chapter 31)

Improvements to land. Inherently permanent structures and the structural components of inherently permanent structures. Treas. Reg. § 1.1031(a)-3(a)(2)(i). (14.3)

Incidental personal property. For the safe harbors, personal property generally resulting in gain recognition under section 1031(b) that is incidental to real property acquired in an exchange. It is incidental if, in standard commercial transactions, it is typically transferred together with the real property, and its aggregate fair market value does not exceed 15 percent of the aggregate fair market value of the replacement real property. The taxpayer's receipt of or right to receive it is disregarded in determining whether a safe harbor ceases to apply. The rule does not make the property like kind, and it remains boot. Treas. Reg. § 1.1031(k)-1(g)(7)(iii). (Chapter 17, 39.4)

Incidental property. For the identification rules, property that is incidental to a larger item of property is not treated as separate from it if, in standard commercial transactions, it is typically transferred together with the larger item, and the aggregate fair market value of all the incidental property does not exceed 15 percent of the aggregate fair market value of the larger item. Treas. Reg. § 1.1031(k)-1(c)(5). Compare Incidental personal property.

Inherently permanent structure. Any building or other structure that is a distinct asset, is permanently affixed to real property, and will ordinarily remain affixed for an indefinite period of time. Affixation is permanent if it is reasonably expected to last indefinitely based on all the facts and circumstances. Treas. Reg. § 1.1031(a)-3(a)(2)(ii)(A). (14.3, 14.4)

Interest and growth factors. Amounts the taxpayer is or may be entitled to receive for the time between the transfer of the relinquished property and the receipt of the replacement property. The constructive receipt determination is made without regard to that entitlement, but only if the agreement expressly limits the taxpayer's rights to receive the interest or growth factor as provided in paragraph (g)(6) of the regulation. Treas. Reg. § 1.1031(k)-1(g)(5). (27.4)

Like kind. A reference to the nature or character of property and not to its grade or quality. One kind or class of property may not be exchanged for property of a different kind or class, but whether real estate is improved or unimproved is not material. Treas. Reg. § 1.1031(a)-1(b). Real property in the United States and real property outside the United States are not of like kind. I.R.C. § 1031(h). (Chapter 15)

Material and substantial contingency. An event that permits an exchange agreement to give the taxpayer rights to exchange funds after the end of the identification period. It must relate to the deferred exchange, be provided for in writing, and be beyond the control of the taxpayer and of any disqualified person other than the person obligated to transfer the replacement property. Treas. Reg. § 1.1031(k)-1(g)(6)(iii)(B). (27.6)

Mortgage boot. See Net liability relief.

Multiple property exchange. An exchange in which more than one exchange group is created, or in which only one exchange group is created but more than one property is transferred or received within it. Such an exchange is analyzed by exchange groups and a residual group rather than property by property. Treas. Reg. § 1.1031(j)-1(b). (32.1, 32.2)

Net liability relief. Practitioners' term, sometimes called mortgage boot or net debt relief, for the excess of the liabilities of which the taxpayer is relieved over the liabilities the taxpayer assumes and the cash or other property the taxpayer gives. The excess is treated as money received. The netting runs in one direction only: consideration given in cash or other property offsets liabilities relieved, but consideration received in cash or other property is not offset by liabilities assumed. Treas. Reg. § 1.1031(d)-2, Example 2(c). (33.3, 34.2, 39.3)

Ninety-five percent rule. An exception to the identification limits, which the regulation calls the 95-percent rule. A taxpayer who identifies more properties than the three-property rule or the two-hundred percent rule permits is treated as having identified no property. The identification is nevertheless effective for replacement property received before the end of the identification period, and for identified replacement property received before the end of the exchange period if the identified property the taxpayer receives by then has a fair market value of at least 95 percent of the aggregate fair market value of all identified replacement properties. Treas. Reg. § 1.1031(k)-1(c)(4)(ii). (25.4)

Nonrecognition transaction. Any disposition of property in a transaction in which gain or loss is not recognized in whole or in part for purposes of subtitle A of the Code. I.R.C. § 7701(a)(45). (Chapter 2)

Parking arrangement. Practitioners' term for an arrangement in which an accommodation party holds title to property so that a taxpayer can acquire replacement property before disposing of relinquished property, or so that improvements can be made before the taxpayer receives the property. The deferred exchange regulations do not apply to exchanges in which the replacement property is acquired before the relinquished property is transferred. Revenue Procedure 2000-37 provides a safe harbor for arrangements that meet its terms, and parking outside it turns on the benefits and burdens of ownership. (30.1, 30.5, 31.5)

Property to be produced. Replacement property that is not in existence or is being produced when it is identified. The terms produced and production have the meanings given in section 263A(g)(1) and the regulations under it. Treas. Reg. § 1.1031(k)-1(e)(1). See Improvement exchange. (31.1)

Qualified escrow account; qualified trust. An escrow account, or a trust, in which the escrow holder or trustee is not the taxpayer or a disqualified person, and the agreement expressly limits the taxpayer's rights to receive, pledge, borrow, or otherwise obtain the benefits of the cash or cash equivalent held, as provided in paragraph (g)(6) of the regulation. For a qualified trust, the relationship between the taxpayer and the trustee created by the trust is not considered a relationship under section 267(b). Treas. Reg. § 1.1031(k)-1(g)(3)(ii), (iii). (27.2)

Qualified exchange accommodation agreement. The written agreement, entered into no later than five business days after qualified indicia of ownership are transferred to the exchange accommodation titleholder, providing that the titleholder holds the property for the benefit of the taxpayer to facilitate an exchange, that the parties will report the acquisition, holding, and disposition of the property as Revenue Procedure 2000-37 provides, and that the titleholder will be treated as the beneficial owner of the property for all federal income tax purposes. Rev. Proc. 2000-37, § 4.02(3). (30.2)

Qualified exchange accommodation arrangement. An arrangement in which property is held by an exchange accommodation titleholder in compliance with the six requirements of Revenue Procedure 2000-37: the titleholder's qualifications, the taxpayer's bona fide intent, a written agreement within five business days, identification of the relinquished property within 45 days, transfer of the property within 180 days, and a combined period of no more than 180 days during which the relinquished and replacement properties are held in the arrangement. The Service will treat the titleholder as the beneficial owner of property held in such an arrangement. Rev. Proc. 2000-37, §§ 4.01, 4.02, as modified by Rev. Proc. 2004-51. (30.2)

Qualified indicia of ownership. Legal title to the property; other indicia of ownership treated as beneficial ownership under applicable principles of commercial law, such as a contract for deed; or interests in an entity disregarded as separate from its owner for federal income tax purposes, such as a single member limited liability company, that holds legal title or such other indicia. Rev. Proc. 2000-37, § 4.02(1). (30.3)

Qualified intermediary. A person who is not the taxpayer or a disqualified person and who enters into a written exchange agreement with the taxpayer and, as required by that agreement, acquires the relinquished property from the taxpayer, transfers the relinquished property, acquires the replacement property, and transfers the replacement property to the taxpayer. Where the agreement expressly limits the taxpayer's rights to the money or other property the intermediary holds, the intermediary is not considered the taxpayer's agent for purposes of section 1031(a). The federal definition contains no licensing, bonding, capital, or fund segregation requirement. Treas. Reg. § 1.1031(k)-1(g)(4)(i) through (iii). (27.3, 55.1)

Real property. Land and improvements to land, unsevered natural products of land, and water and air space superjacent to land. An intangible interest in real property of those types is real property, and, subject to the exclusions for intangible interests, property that is real property under the law of the State or local jurisdiction in which it is located on the date it is transferred is also real property. The definitions apply only for purposes of section 1031. Treas. Reg. § 1.1031(a)-3(a)(1), (5) through (7). (Chapter 14)

Related person. For the related-party rules, any person bearing a relationship to the taxpayer described in section 267(b) or 707(b)(1). I.R.C. § 1031(f)(3). Unlike the disqualified person definition, it does not substitute 10 percent for 50 percent. Compare Disqualified person. (40.2)

Relinquished property. Property held for productive use in a trade or business or for investment that the taxpayer transfers in a deferred exchange. Treas. Reg. § 1.1031(k)-1(a). (24.1)

Replacement property. Property to be held for productive use in a trade or business or for investment that the taxpayer subsequently receives in a deferred exchange. Treas. Reg. § 1.1031(k)-1(a). (24.1)

Residual group. In an exchange of multiple properties, the group created where the aggregate fair market value of the properties transferred in all of the exchange groups differs from the aggregate fair market value of the properties received in all of the exchange groups, taking liabilities into account. It consists of money or other property with an aggregate fair market value equal to the difference, and it consists of property transferred or property received, but not both. Treas. Reg. § 1.1031(j)-1(b)(2)(iii). (32.2)

Reverse exchange. Practitioners' term for an exchange in which the replacement property is acquired before the relinquished property is transferred. The deferred exchange regulations do not apply to such an exchange, and a taxpayer cannot exchange property for property the taxpayer already owns, so one of the properties is held by an accommodation party. See Parking arrangement; Qualified exchange accommodation arrangement. (Chapter 30)

Revocation of identification. An identification may be revoked at any time before the end of the identification period, but only by a written document signed by the taxpayer and hand delivered, mailed, telecopied, or otherwise sent before the end of the period to the person to whom the identification was sent. An identification made in a written exchange agreement is revoked only by a written amendment to the agreement or by a written document signed by the taxpayer as the regulation provides. Treas. Reg. § 1.1031(k)-1(c)(6). (25.6)

Safe harbors. The four arrangements whose use results in a determination that the taxpayer is not in actual or constructive receipt of money or other property: security or guarantee arrangements, qualified escrow accounts and qualified trusts, qualified intermediaries, and interest and growth factors. More than one may be used in the same exchange, but the terms and conditions of each must be separately satisfied. Treas. Reg. § 1.1031(k)-1(g)(1) through (5). (Chapter 27)

Same-taxpayer requirement. Practitioners' term for the requirement that the taxpayer who transfers the relinquished property be the taxpayer who receives the replacement property. No sentence of section 1031 states it; it follows from features of the provision working together. (Chapter 18)

Security or guarantee arrangements. The safe harbor under which the constructive receipt determination is made without regard to the fact that the transferee's obligation to transfer the replacement property is secured or guaranteed by a mortgage, deed of trust, or other security interest in property other than cash or a cash equivalent, by a standby letter of credit meeting the regulation's requirements, or by a guarantee of a third party. It ceases to apply when the taxpayer has an immediate ability or unrestricted right to receive money or other property under the arrangement. Treas. Reg. § 1.1031(k)-1(g)(2). (27.1)

State-or-local-law test. The alternative route by which property is real property for purposes of section 1031 if, on the date it is transferred in an exchange, it is real property under the law of the State or local jurisdiction in which it is located, except as otherwise provided in the rules for intangible interests. Treas. Reg. § 1.1031(a)-3(a)(6). (8.3, 14.6, 66.3)

Straddle-year exchange. Practitioners' term for a deferred exchange in which the relinquished property is transferred in one taxable year and the replacement property is received, or the exchange funds are released, in the next. Coordination rules determine when the taxpayer is treated as receiving payment for installment reporting purposes. Treas. Reg. § 1.1031(k)-1(j)(2). (44.1, 53.2)

Structural component. Any distinct asset that is a constituent part of, and integrated into, an inherently permanent structure. Interconnected assets that work together to serve the structure, such as systems providing electricity, heat, or water, are analyzed together as one distinct asset. A structural component qualifies as real property only if the taxpayer holds its interest in the component together with a real property interest in the space in the structure that the component serves. Treas. Reg. § 1.1031(a)-3(a)(2)(iii)(A). (14.4)

Substantially the same property. Identified replacement property is received before the end of the exchange period only if the taxpayer receives it before the end of the period and the property received is substantially the same property as identified. Where more than one property is identified, the test is applied separately to each. Treas. Reg. § 1.1031(k)-1(d)(1). (26.1, 31.3)

Substituted basis property. Property that is transferred basis property or exchanged basis property. I.R.C. § 7701(a)(42). See Exchanged basis; Transferred basis property.

Swap and drop. Practitioners' term for a partnership's completion of an exchange in its own name, followed by a distribution of interests to partners who wish to separate. (20.3) Compare Drop and swap.

Tacking. The inclusion, in the holding period of property received in an exchange, of the period for which the taxpayer held the property exchanged. It applies if the property received has, for purposes of determining gain or loss, the same basis in whole or in part as the property exchanged, and the property exchanged was, at the time of the exchange, a capital asset as defined in section 1221 or property described in section 1231. I.R.C. § 1223(1). (38.1)

Tenancy-in-common interest. An undivided fractional interest in real property held by co-owners. Revenue Procedure 2002-22 specifies the conditions under which the Service will consider a request for a ruling that an undivided fractional interest in rental real property, other than a mineral property, is not an interest in a business entity. It is ruling guidance, not a safe harbor. Rev. Proc. 2002-22, § 1, 2002-14 I.R.B. 733. (Chapter 21)

Three-property rule. The rule, which the regulation calls the 3-property rule, under which a taxpayer may identify up to three replacement properties without regard to their fair market values, regardless of the number of relinquished properties transferred in the same exchange. Treas. Reg. § 1.1031(k)-1(c)(4)(i)(A). (25.2)

Transfer. For the identification and exchange periods, property is transferred when it is disposed of within the meaning of section 1001(a). Treas. Reg. § 1.1031(k)-1(b)(2)(iv). (26.3)

Transferred basis property. Property having a basis determined in whole or in part by reference to the basis in the hands of the donor, grantor, or other transferor. I.R.C. § 7701(a)(43). Compare Exchanged basis.

Two-hundred percent rule. The rule, which the regulation calls the 200-percent rule, under which a taxpayer may identify any number of replacement properties as long as their aggregate fair market value as of the end of the identification period does not exceed 200 percent of the aggregate fair market value of all the relinquished properties as of the date they were transferred. Treas. Reg. § 1.1031(k)-1(c)(4)(i)(B). (25.3)

Two-year rule. The rule of section 1031(f) under which nonrecognition is lost if a taxpayer exchanges property with a related person and, before the date two years after the date of the last transfer that was part of the exchange, the related person disposes of the property it received or the taxpayer disposes of the like-kind property it received. Gain or loss is taken into account as of the date of the disposition. The period is suspended while the holder's risk of loss is substantially diminished, and dispositions after a death, in certain involuntary conversions, or where neither the exchange nor the disposition had tax avoidance as one of its principal purposes are not taken into account. I.R.C. § 1031(f)(1), (2), (g). (40.3 through 40.5)

Unambiguous description. Replacement property is identified only if it is unambiguously described in the written document or agreement. Real property generally is unambiguously described by a legal description, street address, or distinguishable name. Treas. Reg. § 1.1031(k)-1(c)(3). (25.5)

Unrecaptured section 1250 gain. In general, the amount of long-term capital gain, not otherwise treated as ordinary income, that would be treated as ordinary income if section 1250(b)(1) included all depreciation and the applicable percentage under section 1250(a) were 100 percent, reduced as the statute provides. It is taxed at a maximum rate of 25 percent. I.R.C. § 1(h)(1)(E), (h)(6)(A). (37.2, 39.2)