A. The receipt of any excess cash, net reduction in replacement property debt, net

reduction in replacement property value, excluded property, and/or non-like-kind

property by the taxpayer in the exchange is taxable and termed boot IRC §1031(b)

i. The receipt of excess cash in an exchange is termed cash boot

ii. The net reduction in replacement property debt is known as mortgage boot or

mortgage relief

iii. No losses are recognized under Section 1031, even if non-qualifying property is

received in the exchange IRC §1031(c)

iv. Seller carry-back financing cannot be a part of the exchange unless the taxpayer

can sell the note at a discount to a third-party; or the taxpayer can persuade the

seller of the replacement property to assume the note

1. Taxpayers who retain seller carry-back financing must recognize gain on the

note

2. Gain on seller carry-back financing may be offset by the contribution of cash

EXETER 1031 EXCHANGE SERVICES, LLC

Steven W. Monk      

Vice President and Regional Manager