Is a mortgage "boot" still considered a recognized gain even if the debt, LTV (loan to value) and purchase price have all increased or remained the same in the exchange?
Note: If you aren't familiar with the term "boot" see example below.
The question may appear simple, but even the most simple example is still complicated. Here is an example that is very close to real life:
Purchase a property for $165,000 ($132,000 debt/loan) - 80% LTV
4 years later: 1031 Exchange
Sell original property for $280,000 -/minus approx 3% in fees = $271,000
Remaining Mortgage $123,000
Net Proceeds are: $148,000
Purchase Exchange property for $280,000 ($224,000 debt/loan) - 80% LTV
Down Payment is $56,000
Net Proceeds (boot) after down payment: $92,000
To repeat the question for the example: is the $92,000 "boot" considered a recognized gain and taxable? ie. would it need to be part of the down-payment (thus a final loan of $132k just like the original loan) in order to be safe from capitol gains tax? What if the purchase price was even greater, yet there was still a boot? ie. is boot always considered a recognized gain?