Fagan & Rawlings Capital Management Customer Portal

Fagan & Rawlings Capital Management – A firm dedicated to unbiased investment advice based on an unmatched due diligence process and uncompromised values.

Integrity - Adherence to moral and ethical principles; soundness of moral character; honesty.

Experience – Knowledge or practical wisdom gained from what one has observed, encountered, or undergone.

1031 Exchange - An exchange which is officially called an Internal Revenue Code 1031 Exchange which allows an owner to trade one like property for another under very specific guidelines and defer paying income tax.

1031 Exchange Period – 180 day window in which an investor has to complete a 1031 Exchange.  See also: Identification period   

Adjusted Cost Basis - The financial interest of an asset which equals its cost basis plus the value of any capital improvements, less any depreciation, which the IRS attributes to the owner at the time of sale for the purpose of determining any taxable gain or loss.

Boot - Something not of like kind such as cash or its equivalent or mortgage relief that is given to equalize any difference in value or equity between two properties in a tax deferred exchange.

Capital Gain - Income of a capital item that results from the sale of an asset and not from the usual course of business, the amount by which, the net sale proceeds exceeds the adjusted cost basis (book value). Gains are used for income tax computations and are taxed at a lower rate than ordinary income and are termed long or short term based upon length of time it was held.

Exchange Funds Account – Established by qualified intermediary (QI) to hold the funds used in a 1031 TIC Exchange.

Fair Market Value - The amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under any pressure to buy or sell.

Identification Period – The first 45 days of the 180 day Exchange Period in which the investor must identify the replacement property. 

Like Kind Property - An identification of four of the five types of IRC defined property used in a Section 1031 exchanges having the same nature which are: investment property, income property, property used in trade or business and dealer property.

Napkin Rule – The napkin rule mandates that your replacement property must be equal to or greater in value than your relinquished property for you to completely postpone payment of capital gains taxes. You are also required to use all the proceeds from the sale of your relinquished property for the purchase of the replacement property. If you hold back some of the sale money, you will be liable to pay tax on the amount.

Original Cost Basis - The initial cost or amount paid by the present owner.  Used for tax purposes in calculating capital gains or losses. 

Qualified Intermediary - A party who cannot be a relative or agent of an exchanging party and who is needed to complete a delayed exchange to legally hold funds to facilitate a Section 1031 delayed exchange. As an exception, a real estate agent may serve as intermediary if the current transaction is the only instance in which the agent has represented the exchanging party over the past two years.

Relinquished Property – The original property being sold during the 1031 Exchange process.

Replacement Property – The new property being acquired during the 1031 Exchange process.

Starker Exchange - Another common name for the tax-deferred, like-kind exchange transaction based on a court decision that was handed down (Starker vs. Commissioner) in 1979. The Ninth Circuit Court of Appeals eventually agreed with Starker that it’s delayed tax-deferred, like-kind exchange transaction did in fact constitute a valid exchange pursuant to Section 1031 of the Internal Revenue Code. This ruling set the precedent for our current day 1031 Exchange structure.

Tenancy-In-Common (TIC) – A separate, undivided fractional interest in a property.