You need to upgrade your Flash Player This is replaced by the Flash content. Place your alternate content here and users without the Flash plugin or with Javascript turned off will see this. Content here allows you to leave out noscript tags. Include a link to bypass the detection if you wish.

Boot

Having nothing at all to do with footwear, “Boot” is a term which refers to the items of personal property and/or cash that is necessary to even out an exchange. Boot is property which is received in an exchange and that is not “like kind” as to other property acquired in an exchange transaction. Boot is defined as the “fair market value” of the non-qualified property received in an exchange.

While the receipt of boot will not disqualify the exchange, an Exchanger who receives boot in an exchange transaction generally recognizes gain to the extent of the value of the boot received. Some common examples of Boot are:

Cash proceeds an Exchanger receives from the Qualified Intermediary during or after the exchange;
Nonqualified property, such as stocks, bonds, notes or partnership interests;
Proceeds taken from the exchange in the form of a note or contract for sale of the property. An Exchanger can utilize IRC §453 to recognize the gain (boot) of a seller carry-back note received in an exchange transaction under the installment sale rules;
Relief from debt on the Relinquished Property caused by the assumption of a mortgage, trust deed, contract, or an agreement to pay other debt that is not replaced on the Replacement Property;
Personal Property received in the exchange. Personal Property is never “like-kind” to real property; and
Property that is intended for personal use and not for use by the Exchanger as either his/her investment or business use property.
To avoid the receipt of Boot the Exchanger should:
Purchase “like-kind” Replacement Property of equal or greater net sales price than the Relinquished Property;
Reinvest all of the net equity (exchange funds) from the sale of the Relinquished Property in the purchase of the Replacement Property; and
Obtain equal or greater debt on the Replacement Property than was paid off, assumed, or taken subject to on the Relinquished Property. Exception: A reduction in debt on the Replacement Property can be offset with additional cash from the Exchanger, but increasing the debt on the Replacement Property cannot offset a reduction in the exchange equity, thereby resulting in excess exchange funds upon the completion of the exchange. Any excess exchange funds will be Boot and the capital gain tax will be recognized to the extent of the Boot received.

All investment strategies have risks. Past performance and/or forward statements are never an assurance of future results. Only a sponsor’s Private Placement Memorandum or Prospectus is controlling.

Nothing contained herein shall constitute an offer to sell or a solicitation of an offer to buy any security. Such offers may only be made by written prospectus and only in a jurisdiction where the security is duly registered or exempt from registration therein.