Boot

What is 'Boot'

Boot is 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.

BREAKING DOWN '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. Golden Boot

    An inducement or incentive for an older worker to "voluntarily" ...
  2. Nonmonetary Transaction

    Transactions that do not result in a transfer of funds between ...
  3. Nonmonetary Assets

    Assets in which the right to receive a fixed or determinable ...
  4. Reverse Exchange

    A type of property exchange wherein the replacement property ...
  5. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  6. Currency Exchange

    A business that allows customers to exchange one currency for ...
Related Articles
  1. Personal Finance

    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.
  2. Trading

    Trade Properties To Keep The Taxman At Bay

    Like-kind exchanges can mean a much lower tax bill on real estate for savvy investors.
  3. Trading

    Use Real Estate To Put Off Tax Bills

    Find out how you can build wealth and reduce your taxes.
  4. Managing Wealth

    How Does a Tax-Free Exchange Work?

    In regards to the sale of property, particularly in real estate, a 1031 exchange is increasingly being recognized for its tax benefits to investors of all levels.
  5. Markets

    2 Consumer Staples Stocks Near Their 52-Week Lows Worth Buying (WBA, FLO)

    Consider the fundamentals for Walgreens Boots Alliance and Flowers Foods as post-earnings report price reductions create bargains for investors.
  6. Personal Finance

    How To Prevent A Tax Hit When Selling A Rental Property

    Rental property ownership has its benefits but when selling you can face a big tax hit. Thankfully there are ways to reduce your capital gains exposure.
  7. Investing

    What's an Exchange?

    An exchange is an organized marketplace where securities and other financial instruments are traded.
  8. Investing

    Walgreens Boots Alliance: An Activist Investment Analysis (WBA)

    Find out how Jana Partners, led by activist investor Barry Rosenstein, used a 1.2% stake to influence Walgreens' corporate strategy and gain two board seats.
  9. Personal Finance

    Your Property Tax Assessment: What Does It Mean?

    The amount of a property tax bill is based on the property’s value, the exemptions it qualifies for, its use and the local property tax rate.
  10. Markets

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
RELATED FAQS
  1. What happens when someone is given the golden boot?

    In business, the term "golden boot" describes the package used to convince older workers to take early retirement. Forcing ... Read Answer >>
  2. Do I have to pay capital gains tax on commercial property?

    I am retired and living on a fixed income. When selling a piece of commercial property, do I have to report and pay capital ... Read Answer >>
  3. Why will some insurance companies not honor a partial 1035 exchange?

    I've accrued approximately $15,000 cash value on a $25,000 Whole Life Policy with a company A. I initiated a 1035 exchange ... Read Answer >>
  4. How does a company switch from one stock exchange to another?

    A publicly traded company can, in fact, switch to a stock exchange that it believes will be favorable to its financing efforts. ... Read Answer >>
  5. What are the rules behind the delisting of a stock?

    The criteria to remain listed on an exchange differs from one exchange to another. On the New York Stock Exchange (NYSE), ... Read Answer >>
  6. Why are traders on the floor of the exchange?

    Before the advent of electronic trading platforms, the floor of the stock exchange was the location for market transactions ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center