Boot (Taxation) – Definition

Cite this article as:"Boot (Taxation) – Definition," in The Business Professor, updated October 22, 2019, last accessed October 20, 2020,


What is Boot for Tax Purposes?

In business, boot refers to a situation in the exchange market whereby an item, property or money is added to an exchange to make the value of traded goods exact. When cash is added to an exchange to equate the value of the traded goods, it is called cash boot. In the United States, there are certain regulations of boot stated in the U.S. Generally Accepted Accounting Principles. When used as a non-monetary exchange, a boot should be less than or 25% the value of the exchange.

Boot is a term that is used in different contexts and attract diverse meanings. When used for a project financing, boot can mean a private entity getting a compromise to fund or conduct a project under a public entity.

A Little More on What is Boot

In the United States, Boot can be used for different exchanges or trades but it is commonly used for the trade of automobiles, home accessories, gadgets and equipment. For instance, if a mobile-phone user wants to change his old phone to a new one, he can swap the old phone to a new one and add extra cash, the extra cash added is the boot. Also, in the exchange of a n old car for a new one, the extra cash or additional property added is the boot.

Given the fact that it is difficult to two items or properties that will have exact values, boot is important. Boot equates the value of two items. For tax purposes, the boot is subject to tax while the base amount in the exchange is tax-exempted.

Reference for “Boot”

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