This is the term that has been designated by the Internal Revenue Service to describe the consideration (sale proceeds) realized by a taxpayer outside of his Tax-Deferred Exchange pursuant to Internal Revenue Code 1031. The rules of a 1031 exchange require that all consideration must flow directly into the replacement investment property(ies). Should a taxpayer elect to receive any portion of the proceeds directly, then this ‘boot’ becomes subject to any applicable taxation for the year of the sale.
