Boot
Boot is money, nonqualifying property, or certain net liability relief received in a nonrecognition transaction and can cause current gain recognition.
U.S. tax concepts for like-kind real-property exchanges, boot, involuntary conversions, gain recognition, and replacement basis.
Like-Kind and Involuntary Property Exchanges covers two separate U.S. gain-deferral frameworks. A Like-Kind Exchange is a planned Section 1031 exchange of qualifying business or investment real property. An Involuntary Conversion arises from destruction, theft, seizure, requisition, condemnation, or a qualifying threat and is analyzed under Section 1033.
Both frameworks can defer rather than eliminate gain, and both preserve deferred gain through basis rules. Boot explains how cash, nonqualifying property, or certain net debt relief can create current gain in an otherwise nonrecognition transaction.
| Question | Section 1031 exchange | Section 1033 conversion |
|---|---|---|
| What starts the transaction? | Planned transfer and receipt of qualifying real property | Specified involuntary event or taking |
| What replacement standard applies? | Like-kind real property held for business or investment | Similar or related in service or use, subject to special rules |
| What timing matters? | 45-day identification and 180-day receipt rules for deferred exchanges | Replacement period depends on event and property type |
| What records control? | Exchange agreement, intermediary records, identification, closings, basis, and liabilities | Loss or taking evidence, proceeds, basis, replacement purchase, election, and deadline |
Identify the governing Code section before applying a deadline or replacement standard. Reconcile adjusted basis, fair value, proceeds, liabilities, transaction costs, recognized gain, deferred gain, and replacement basis. Current federal, state, and other jurisdictional rules can differ, and financial-statement treatment does not establish tax treatment.
These pages provide financial education, not tax, legal, accounting, investment, insurance, or real-estate advice. Transaction-specific qualification and filing positions require current authority, complete records, and qualified professional review.
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Boot is money, nonqualifying property, or certain net liability relief received in a nonrecognition transaction and can cause current gain recognition.
An involuntary conversion occurs when property is destroyed, stolen, seized, requisitioned, or condemned and may qualify for gain deferral under Section 1033.
A like-kind exchange can defer U.S. federal gain on qualifying business or investment real property when Section 1031 requirements are met.