Boot (1031 Exchange)

Definition

Boot refers to any non-like-kind property or cash received by the taxpayer in a 1031 exchange, including mortgage debt relief, cash proceeds, or personal property that does not qualify for deferral. The portion of the gain attributable to boot is immediately taxable in the year of the exchange, even if the rest of the gain is deferred. CPAs must carefully calculate boot exposure when the replacement property's value or debt assumption does not fully offset the relinquished property's sale price and existing liabilities.