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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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
In your Room, this word explains itself where it appears.
Your Room defines boot in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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