What is Boot?
Boot is a non-like-kind consideration received in a 1031 exchange that triggers partial taxable gain recognition even when the exchange otherwise qualifies for deferral treatment. Cash boot occurs when exchange proceeds are not fully reinvested in replacement property. In contrast, a mortgage boot arises when the replacement property debt is less than the relinquished property debt, unless the taxpayer adds cash to equalize the exchange. Property boot includes any non-qualifying property received in the transaction, such as personal property or securities. The boot amount is taxable up to the realized gain on the exchange, with the remainder of the gain remaining deferred. Strategic planning through Sell your home exclusion coordination helps minimize boot recognition while maximizing wealth preservation through complete tax deferral in qualified exchanges.
.png){kind=small}