Boot

AAA

DEFINITION of 'Boot'

Cash or other property added to an exchange or other transaction in order to make the value of the traded goods equal. Cash boot is allowed to be part of a nonmonetary exchange under U.S. Generally Accepted Accounting Principles. However, for the exchange to qualify as nonmonetary, the value of the boot should be 25% or less of the total fair value of the exchange.

INVESTOPEDIA EXPLAINS 'Boot'

When you trade in an older car and also pay cash for a new model, the cash you pay in addition to your older car is the boot.


Boot might also come into play in a 1031 exchange. Because it is difficult to find two like-kind properties of identical value to exchange, one party will commonly contribute cash and/or physical property to even out the exchange. The base amount of the exchange remains tax deferred, but the boot is considered a taxable gain. Even with the boot, however, the recipient will pay less in capital gains taxes for the current tax year than if he had sold the appreciated property and then purchased a different property.

RELATED TERMS
  1. Barter

    The act of trading goods and services between two or more parties ...
  2. Time-Based Currency

    A currency whose value is based on one man-hour of labor. A time-based ...
  3. Unfair Trade Practice

    Using various deceptive, fraudulent or unethical methods to obtain ...
  4. Tying

    An often illegal arrangement where, in order to buy one product, ...
  5. Kicker

    1. A right, exercisable warrant, or other feature that is added ...
  6. Trade

    A basic economic concept that involves multiple parties participating ...
RELATED FAQS
  1. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  2. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  3. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  4. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  5. What are some of the limitations and drawbacks of using a payback period for analysis?

    Limitations, or disadvantages, of using the payback period method in capital budgeting include the fact that it fails to ... Read Full Answer >>
  6. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  2. Retirement

    Year-End Tips For Your Retirement Plan

    To avoid penalties or missed opportunities, make sure you know which transactions must be completed by December 31.
  3. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  4. Options & Futures

    Putting Management Under The Microscope

    We tell you where to find the telltale signs of corporate misdeeds.
  5. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  6. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  7. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.
  8. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  9. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  10. Fundamental Analysis

    What is Year-to-Date?

    Year-to-date (YTD) is a term that describes financial results from the beginning of the current year up to the day the financial number is reported.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!