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Boot

An exchange may be totally tax deferred or partially tax deferred depending upon the handling of the transaction and the existence of "taxable boot".

In terms of I.R.C. §1031, boot is property that is not considered like-kind.  Boot may be given or received.  If the Exchangor receives cash, a boat, anything other than real estate, they have received cash boot.  If an Exchangor gives these items, they are giving cash boot. 

If the investor does have a gain (which should be determined by the investor's accountant).  To avoid boot, an Exchangor must trade across or up in three areas:  Sales Price, Equity and Mortgage.

Cash Boot:

All non-like kind property which is not mortgage boot.

Mortgage Boot:

The difference between the mortgage debt the Exchangor has on the relinquished property and the amount they have on the replacement property.  If the Exchangor increases the debt, they give mortgage boot.  If they decrease the debt, they receive mortgage boot.