What’s the Boot?
The term “boot” refers to any non-like-kind property that is exchanged. Boot, which is most often in the form of cash, can result when the value of the piece of real property being relinquished is greater than the value being acquired. Receiving a boot in a like-kind exchange doesn’t disqualify the exchange, it only introduces a taxable gain to the transaction. Only the gain that results from cash and unlike property is taxable. These amounts cannot exceed the amount of the gain recognized if the property was sold in a taxable transaction. How to Calculate the Gain To calculate taxable gain, a property seller should begin with the price of the relinquished property and then subtract the adjusted basis of the property. This amount is the realized gain. The adjusted basis is the purchase price of the relinquished property plus any capital improvements to the property, less any depreciation. The basis amount carries over to become the basis of the replacement property. While 1031 exchange
