Boot is a big deal in the realm of 1031 exchanges, but many taxpayers don’t pay enough attention to it, and end up paying the price (literally). In this article, we are going to talk about how to deal with taxable boot in a 1031 exchange.
A Brief Refresher on Boot
First, let’s make sure we’re all on the same page when we use the word “boot.” In a 1031 exchange, boot refers to any non like-kind property received during the course of a 1031 exchange. Typically, boot comes in the form of cash. When a taxpayer receives any cash proceeds during their 1031 exchange, they are deemed to have received boot and will be taxed accordingly. In general, you want to avoid boot at all costs in a 1031 exchange.
Dealing with Boot
Boot is a complex topic but the most important thing to remember is you do NOT want to receive any boot at any point during the 1031 exchange process. So how do you avoid boot? By following the strict regulations of section 1031 of the Internal Revenue Code. This is where a qualified intermediary can be invaluable in helping you through your exchange.
Defer Your Capital Gains Taxes
In a 1031 exchange, you can defer your capital gains taxes when selling a piece of investment real estate. But it’s not quite as easy as it sounds. You need to satisfy a number of requirements in order to have a successful 1031 exchange. This can all get a bit complicated, but with the help of a qualified intermediary, your exchange can go off without a hitch! Contact our intermediaries today to learn more about our services and to set up a time to chat about your exchange. You can find us at our primary office in downtown Minneapolis.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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