Boot
Cash or other non-like-kind property received in a 1031 exchange. Boot is taxable, even when the rest of the exchange qualifies for deferral. A common source is not reinvesting all the proceeds.
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Free to set up. No credit card.Part 1 of 4
Why a seller cares
In a 1031 exchange, any cash or debt relief you walk away with is boot, and boot is taxed. Selling a rental for $400,000 and buying a replacement for $350,000 leaves $50,000 of boot, however the rest is structured.
Part 2 of 4
A simple example
You sell a rental for $400,000 with a $150,000 mortgage and buy a replacement for $380,000 with a $140,000 mortgage. There is cash boot and mortgage boot.
| What happened | The boot |
|---|---|
| $20,000 less spent on the replacement | Cash boot, taxable |
| $10,000 less debt on the replacement | Mortgage boot, taxable unless offset with cash |
| Everything reinvested and debt replaced | No boot; full deferral |
Boot is whatever did not get rolled forward. The tax follows it.
Part 3 of 4
What people get wrong
That an exchange is all or nothing. A partial exchange still defers most of the gain; only the boot is taxed.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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