Like-Kind Property Requirements Flashcards
6 cards from real CES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Like-Kind Property Requirements flashcards as text
What term is used to describe property given up by the taxpayer in a 1031 exchange?
Answer: Relinquished property
The property given up by the taxpayer is called the relinquished property.
In a 1031 exchange, what does 'boot' refer to?
Answer: Any unlike property or cash received in the exchange
Boot is any unlike property or cash received in the exchange, which is taxable to the extent of gain.
A taxpayer exchanges a property worth $500,000 for a replacement property worth $450,000 and receives $50,000 in cash. How is the $50,000 treated?
Answer: It is treated as boot and is taxable
The $50,000 in cash received is boot and is taxable to the extent of the taxpayer's realized gain.
Which of the following would create 'mortgage boot' in a 1031 exchange?
Answer: Acquiring a replacement property with a lower mortgage than the relinquished property
If the taxpayer takes on less debt on the replacement property than existed on the relinquished property, the net debt relief is treated as mortgage boot.
To fully defer capital gains tax in a 1031 exchange, the replacement property must have a value that is:
Answer: Equal to or greater than the relinquished property
To fully defer gain, the taxpayer must acquire replacement property of equal or greater value and reinvest all net exchange proceeds.
Which of the following is considered 'exchange expenses' that reduce boot in a 1031 exchange?
Answer: Qualified intermediary fees
Qualified intermediary fees are exchange expenses that can reduce the amount of taxable boot received.