Boot and Exchange Expenses
Boot is any non like-kind payment received as part of an exchange. Boot is categorized as either "mortgage" boot or "cash" boot. Mortgage boot is made up of liabilities assumed in the exchange. (For example, if the Taxpayer's mortgage is paid off, he has "received" boot; if he assumes another party's mortgage, he "pays" boot.) Cash boot is cash or other non like-kind property. Remember that relief of debt is a taxable event.
Taxes may be due if the Taxpayer places more debt on the replacement property than there was on the relinquished property. If the increased debt results in excess proceeds because the Taxpayer did not use all of the funds held by the QI, the Taxpayer will receive taxable boot.
See articles below for more information on boot:
Certain expenses paid at a closing are considered “exchange expenses” and using exchange funds to pay those expenses won’t result in any tax liability to an investor doing a 1031 exchange.
Other expenses are not exchange expenses, so although exchange funds can be used to pay the expense, doing so results in the exchange being partially taxable.