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Hi. I'm PDtax, and can assist.
Since you did not have any debt on the property given up, the mortgage assumed on the property received is not boot.
example: your property worth $100,000 and no debt is exchanged for a $160,000 property subject to a $60,000 mortgage. No boot.
In reading your question again, you didn't say which property had the mortgage on it at exchange. If you refinanced the property exchanged before the exchange, then you have boot.
Example #2: your property worth $100,000 has a $40,000 mortgage when exchanged for $160,000 property subject to a $60,000 mortgage. There is $40,000 boot.
I have to revise example #2. You did not have mortgages on both parcels. Please clarify your fact pattern.
I don't understand. From your questions:
" if that mortgage is paid off now but replaced by a new mortgage of the same amount from a 3rd party lender when the exchange is completed, will that avoid mortgage boot on the exchange?" sounds like your property was debt free when exchanged.
your follow up:
"My issue is paying off mortgage on current property owed to a partner on exchange out. If we have equal debt to 3rd party on exchange in is there mortgage boot?" sounds like there was debt on the property you gave up.
the formula for boot:
The formula for determining boot received is as follows:
Mortgage on your property surrendered - Mortgage on the property received - Additional cash paid by you towards the new property *= Net boot received (not less than zero)+ Any cash received by you in the exchange= Boot received
Did you provide interim financing to pay off the original mortgage, or did you use the proceeds from the new loan to satisfy the old debt?
Let's say there was $30,000 outstanding on the property exchanged, and $30,000 in debt on the new property received. In this case, there would be no boot.
Since you received no net cash at settlement, there is no boot. Positive feedback is appreciated. I'm PDtax.
Hi again. PDtax here. Can I ask for positive feedback to close out your question?
Hi again. PDtax here. There may be more to your question. Can you tell me when you bought out the partner?