What is "boot"? A 1031 is an exchange of like property. If the exchange has cash coming back to you then this is capital gains. I would go the "IRS" web site, type in 1031 and read about the matter.
11th April, 2003
"Boot" is a common term in 1031's. It refers to anything received that is not "like kind". Example, I sell real estate for 500,000 and 1031 to another property with a 500,000 value. However, I decide to take 50000 cash from the proceeds and take a mortgage for the same amount. The 50K becomes "boot" as long and is taxable. My question is, is it taxed as cap gain or ordinary income.
The tax treatment for boot is the same treatment that would apply if the property were sold for all cash without the benefit of the exchange.
If the relinquished property would otherwise qualify for long term capital gains tax treatment, then any cash boot received would be taxed as a long term capital gain.
11th April, 2003
Thanks Dave. That is what I feared. I have a large short-term gain possible, but if I touch any of it, I will be taxed at ordinary income rates.
What is "boot"? A 1031 is an exchange of like property. If the exchange has cash coming back to you then this is capital gains. I would go the "IRS" web site, type in 1031 and read about the matter.
"Boot" is a common term in 1031's. It refers to anything received that is not "like kind". Example, I sell real estate for 500,000 and 1031 to another property with a 500,000 value. However, I decide to take 50000 cash from the proceeds and take a mortgage for the same amount. The 50K becomes "boot" as long and is taxable. My question is, is it taxed as cap gain or ordinary income.
The tax treatment for boot is the same treatment that would apply if the property were sold for all cash without the benefit of the exchange.
If the relinquished property would otherwise qualify for long term capital gains tax treatment, then any cash boot received would be taxed as a long term capital gain.
Thanks Dave. That is what I feared. I have a large short-term gain possible, but if I touch any of it, I will be taxed at ordinary income rates.