Palo Alto Real Estate News

1031 Exchange, Cash Boot Is Taxed

by | Jun 15, 2022 | taxes

If your replacement property has a lower purchase price than the sales price of the property you sold, the difference will be refunded to you by your 1031 exchange intermediary at the end of the 180 day period defined for purchasing your replacement property. Since you will be receiving the cash, the IRS will not defer the taxes owed on this portion of your sale. Typically it will be taxed as a capital gain. This cash received is referred to as a cash boot. View more 1031 exchange rules.

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