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. Numismatics

    The study of the physical embodiment of various payment media ...
  6. Kicker

    1. A right, exercisable warrant, or other feature that is added ...
Related Articles
  1. Principal Trading and Agency Trading
    Investing Basics

    Principal Trading and Agency Trading

  2. Year-End Tips For Your Retirement Plan
    Retirement

    Year-End Tips For Your Retirement Plan

  3. Avoid Capital Gains Tax On Your Home ...
    Taxes

    Avoid Capital Gains Tax On Your Home ...

  4. Putting Management Under The Microscope
    Options & Futures

    Putting Management Under The Microscope

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center