boot

Definition

Additional cash or property value included in a 1031 exchange to equalize the values being swapped, which unfortunately becomes taxable income. Named perfectly for something that kicks you right in the tax deferral strategy.

Example Usage

She had to pay taxes on the $50,000 boot she received because her exchange property was worth less than the one she sold.

Origin

Old English term 'bot' meaning 'advantage' or 'profit,' adapted into tax exchange terminology in the mid-20th century

Fun Fact

Creative investors sometimes use boot strategically, accepting some taxable gain to access cash while still deferring taxes on the majority of their profit.

Source: IRS 1031 exchange regulations

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