Boot
Boot is any non-like-kind value received in a 1031 exchange — typically cash left over or debt relief that isn't replaced — and it is taxable up to the amount of gain.
What it means
Boot comes in two flavors. Cash boot is sale proceeds left over after the replacement purchase; mortgage boot is a reduction in debt not offset by new debt or out-of-pocket equity. Boot is recognized as gain to the extent of the total realized gain on the exchange.
A fully tax-deferred exchange requires trading equal or up in price, equal or up in equity, and equal or up in debt (or replacing reduced debt with cash). Any shortfall surfaces as boot.
Partial exchanges are allowed — you can take cash out and defer the rest — but the cash portion is taxed. Some exchangers intentionally take small boot to cover closing costs or a renovation reserve.
Example
Sell for $3M (mortgage $1M), buy for $2.8M (mortgage $1M), leaving $200K of cash. That $200K is cash boot and is taxable.
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