Boot (Tax)
Boot is the taxable portion received in an otherwise tax-free exchange, such as a like-kind exchange under Section 1031. Boot includes cash, debt relief, or non-qualifying property received, and triggers gain recognition up to the amount of boot received.
Exam Tip
Boot = cash or non-qualifying property received in a 1031 exchange. Gain recognized = lesser of boot or realized gain. Mortgage relief = boot received.
What is Boot?
Boot is any non-qualifying property or cash received in a tax-deferred exchange. Receiving boot triggers taxable gain up to the lesser of the boot amount or the realized gain.
Types of Boot
| Type | Example |
|---|---|
| Cash boot | Receiving cash in the exchange |
| Mortgage boot | Debt relief exceeds debt assumed |
| Non-like-kind property | Personal property in a real estate exchange |
Boot Taxation Rules
| Scenario | Tax Result |
|---|---|
| No boot received | Fully tax-deferred |
| Boot received < realized gain | Taxable to extent of boot |
| Boot received > realized gain | Taxable only to extent of gain |
| Boot given (not received) | No gain recognized |
Example
| Item | Amount |
|---|---|
| FMV of property given | $500,000 |
| Adjusted basis | $300,000 |
| Realized gain | $200,000 |
| Cash boot received | $50,000 |
| Recognized gain | $50,000 (lesser of boot or gain) |
Exam Alert
Boot = taxable portion of a 1031 exchange. Gain is recognized up to the LESSER of boot received or realized gain. Giving boot does NOT trigger gain. Mortgage relief is treated as boot received.
Study This Term In
Related Terms
Like-Kind Exchange (Section 1031)
A like-kind exchange under IRC Section 1031 allows taxpayers to defer capital gains tax by exchanging qualifying real property held for business or investment purposes for similar property. The replacement property must be identified within 45 days and the exchange completed within 180 days. Personal property no longer qualifies after the Tax Cuts and Jobs Act (2017).
Basis (Tax Basis)
Basis is the cost or adjusted value of an asset used to determine gain or loss on sale or disposition. Original cost basis includes purchase price plus improvements minus depreciation. Gift basis equals the donor's basis (carryover), while inherited property receives a stepped-up basis to fair market value at death.
Capital Gains Tax
Capital gains tax is a tax on the profit from selling investments or assets. Short-term gains (assets held less than 1 year) are taxed as ordinary income; long-term gains (held more than 1 year) receive preferential rates of 0%, 15%, or 20% based on income.
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