The term 'BOOT' has distinct meanings in both computing and taxation. In computing, it refers to the process of starting a computer. In taxation, it refers to additional property or money included to balance the values in a tax-deferred exchange.
A Delayed Exchange, also known as a Section 1031 Exchange or Tax-Free Exchange, allows investors to defer capital gains taxes on the sale of an investment property by reinvesting the proceeds into a similar property within a specified time frame.
An exchange refers to the act of giving goods or services and receiving goods or services of equal value in return. It encompasses various contexts, including commercial transactions, securities trading, and tax-related property exchanges.
In the context of tax-free exchanges, a recognized gain is the portion of a gain that becomes taxable. While a realized gain represents the total profit from the sale or exchange of an asset, the recognized gain is the part that the IRS considers taxable income.
Section 1031 of the Internal Revenue Code addresses tax-free exchanges of certain properties, primarily real estate, provided specific conditions are met.
A Tax-Free Exchange, Delayed is a transaction where property is traded with the promise to provide a like-kind replacement in the near future, allowing deferral of tax on the gain under stringent conditions.
