1031 Exchange With Debt
Description
How to fill out Contract Or Agreement To Make Exchange Or Barter And Assume Debt?
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FAQ
The term boot refers to non-like-kind property received in an exchange. Usually, boot is in the form of cash, an installment note, debt relief or personal property and is valued to be the ?fair market value? of the non-like-kind property received.
All cash and debt must be replaced in the exchange. That's why, at the least, the investor must exchange into a property of equal value. Specifically for any debt, the financing requirement of the replacement property must match or exceed the existing debt.
The property must be a business or investment property, which means that it can't be personal property. Your home won't qualify for a 1031 exchange. However, a single-family rental property that you own could be exchanged for commercial rental property.
All cash and debt must be replaced in the exchange. That's why, at the least, the investor must exchange into a property of equal value. Specifically for any debt, the financing requirement of the replacement property must match or exceed the existing debt.
Under IRC Section 1031 (b) and related guidance, it is a general principle that proceeds from a sale used in the exchange cannot be used to pay off liabilities that are unrelated to the relinquished property (they do not share a common nexus).