In short
Boot is cash or other property received in an otherwise tax-deferred exchange, such as a like-kind exchange or a transfer to a corporation, that doesn't qualify for deferral. Gain is recognized up to the boot received.
Key takeaways
- Being relieved of a liability counts as receiving boot.
- Receiving boot never causes a loss to be recognized.
- The new property's basis is reduced by boot received and increased by gain recognized.
Where it's tested
REG: Property Transactions: Gains, Losses & Like-Kind Exchanges — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
In a Section 1031 exchange, a taxpayer's realized gain is $80,000 and the taxpayer receives $30,000 of cash boot. How much gain is recognized?