1031 Real Estate Property Tax-Deferred Exchange

Adams County Colorado 1031 Tax-Deferred Exchange Programs

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LAND, PROPERTY, REAL ESTATE

Adams County Colorado 1031 Real Estate Property Tax-Deferred Exchange

What is a "BOOT"?

Boot is defined as any "NON-LIKE-KIND" property received by the Exchanger in the exchange and it is taxable.

  1. CASH BOOT--Cash Boot consists of any funds actually or constructively received by the Exchanger.   Receipt of funds may occur if the proceeds from the sale of the relinquished property are not fully used to acquire the replacement property, then the remaining proceeds are subject to being taxed.  Cash Boot may also be in the form of a promissory note that is received by the Exchanger.  Please contact us for more information on situations where the Exchanger will be helping to finance the relinquished property.

  2. MORTGAGE BOOT OR "DEBT RELIEF"---Mortgage Boot occurs when the Exchanger does not acquire debt that is equal to or greater than the debt that was paid off, therefore, they were "RELIEVED" from a debt.  If the Exchanger does not acquire equal or greater debt on the replacement property, they are considered to be "RELIEVED OF DEBT", which is perceived as taking a monetary benefit out of the exchange.  Therefore, the debt relief portion is taxable, unless it is offset by adding equivalent cash to the transaction. There is more to it than just spending all the exchange equity!

In conclusion, an Exchanger must buy replacement property of equal or greater value while spending the "NET" (after costs) equity.  It is absolutely acceptable to take cash out of the exchange and pay taxes on that amount.

FOR ALL OF THE INFORMATION YOU WILL NEED, PLEASE CONTACT:

Dick Palmer

METRO DENVER COLORADO COMMERCIAL PROPERTY

Pathfinder

Investment Corporation

2953 S. Peoria St. 

Suite 101

Aurora, Co 80014

DIRECT TELEPHONE: 303-759-8500

E-MAIL: sales@landoffice.com

FAX: 303-759-8400

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This material is designed only to provide information concerning I.R.C. Section 1031 Tax-Deferred Exchanges.  It is not intended to provide or replace legal, accounting or other professional counsel.

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