Relinquished Property

What it means

In 1031 terminology, the property you sell is the relinquished property, downleg, or Phase I property. Its sale triggers the 45-day identification clock and the 180-day exchange clock. Proceeds flow to the QI, not to the seller, to preserve the exchange.

The relinquished property must have been held for productive use in a trade or business or for investment. A flip held for a few months likely fails that test; a property held and rented for years clearly qualifies.