Fairhaven Realty
Fairhaven Realty, a br of Lakeway Realty, Inc.
Q & A 1031 Tax Exchanges
Posted on March 22, 2010
It's warm and sunny in Bellingham, WA on this Monday, March 22, 2010. It is expected to reach 65 degrees tomorrow. Over the weekend, I noticed an apartment complex with its swimming pool already open and tenants thoroughly enjoying it!
QUESTIONS AND ANSWERS ON 1031 TAX EXCHANGES (continued from previous blogs).
QUESTIONS AND ANSWERS ON 1031 TAX EXCHANGES (continued from previous blogs).
What is Mortgage Boot?
Mortgage Boot consists of liabilities assumed or given up by the taxpayer. The taxpayer pays mortgage boot when he assumes or places debt on the replacement property. The taxpayer receives mortgage boot when he is relieved of debt on the replacement property. If the taxpayer does not acquire debt that is equal to or greater than the debt that was paid off, they are considered to be relieved of debt. The debt relief portion is taxable, unless offset when netted against other boot in the transaction.
What is Cash Boot?
Cash Boot is any boot received by the taxpayer, other than mortgage boot. Cash boot may be in the form of money or other property.
What are the boot "netting" rules?
- Cash boot paid offsets cash boot received
- Cash boot paid offsets mortgage boot received (debt relief)
- Mortgage boot paid (debt assumed) offsets mortgage boot received
- Mortgage boot paid does not offset cash boot received
*Information gathered/quoted from the National Association of REALTORS® online library-1031 Exchange-FEA (Federation of Exchange Accommodations)
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