Boot
Boot is any cash or non-like-kind value received in a 1031 exchange; it is taxable up to the amount of gain and reduces the deferral you achieve.
Definition
Boot is anything of value received in a 1031 exchange that is not like-kind real estate. The classic examples are cash left over (cash boot) and a reduction in debt (mortgage boot). Receiving boot does not disqualify the exchange, but it makes that portion taxable.
Boot is taxed as recognized gain up to the amount of your total realized gain. Say you sell a $1 million property with a $300,000 gain and buy a $900,000 replacement, pocketing $100,000. That $100,000 is boot and is taxable, while the remaining $200,000 of gain stays deferred.
To fully defer tax, an investor must trade equal or up in value, reinvest all equity, and replace all debt. Boot most often appears by accident: leftover proceeds, taking on a smaller mortgage, or receiving personal property with the real estate. Careful structuring with the qualified intermediary avoids it.
Key points
- Any non-like-kind value received, such as cash or debt relief
- Taxable up to the amount of realized gain
- Cash boot and mortgage boot are the two main types
- Avoided by trading equal or up and reinvesting all equity and debt
Related terms
Jerry Baker founded Baker 1031 Investments to help exchange investors move from active property ownership into passive, institutional-quality real estate through DST, 721 exchange, mineral royalty, and Opportunity Zone strategies. He holds the FINRA Series 22 and Series 63 registrations and the Securities Industry Essentials (SIE) qualification. Read full bio →
Reviewed by the Aurora Securities, Inc. compliance team — Aurora Securities, Inc., member FINRA/SIPC. Last reviewed July 2026. Securities are offered through Aurora Securities, Inc.; Baker 1031 Investments, LLC is independent of Aurora Securities, Inc.
This glossary entry is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. Definitions are general and may not reflect your specific circumstances — consult your own CPA and attorney. Past performance does not guarantee future results.