How to Avoid a "Boot" and Choose the Right Qualified Intermediary in a 1031 Exchange

By Costanza Genoese Zerbi | RealTrends Verified Top Agent Southern California | eXp Realty of Greater Los Angeles

Published August 2026 | Reading time: approximately 5 minutes

Last week, I wrote about selling my parents' Long Beach condo and starting my own 1031 exchange. Since then, I've gotten a lot of questions about the part of the process that trips people up most — not the deadlines, but the details that can quietly disqualify an exchange even when everything looks like it's going right.

There are three of them worth knowing before you ever get to escrow: the "boot," the Qualified Intermediary requirement, and the same-taxpayer rule. Here's what each one means, in plain language.

What Is a "Boot"?

In a 1031 exchange, "boot" is any value you receive that isn't reinvested into the replacement property — and it gets taxed immediately, even though the rest of your gain is deferred.

This happens more often than people expect. If you sell for more than you spend on the replacement property, that difference is boot. If you take on less debt on the new property than you had on the old one, that counts as boot too. Even a small amount of cash back at closing counts.

The fix, in concept, is simple: reinvest equal or greater value, and take on equal or greater debt, compared to what you sold. In practice, it takes real coordination between your agent, your lender, and your Qualified Intermediary to make the numbers actually line up — especially if you're closing two properties around the same time, where the numbers you're working with are often estimates until the very end.

Why You're Required to Use a Qualified Intermediary

A Qualified Intermediary, or QI, is the person or company that holds your sale proceeds throughout the exchange. This isn't optional — it's a legal requirement. You cannot touch the proceeds yourself, even for a single day, or the entire exchange is disqualified and the full tax bill comes due immediately.

When choosing a QI, a few things are worth checking:

• Specialization. Look for a company that handles only 1031 exchanges, not a side service tacked onto a title company.
• How funds are held. You want your proceeds in a separate, insured account — not commingled with other clients' money.
• Bonding and insurance coverage, in case anything goes wrong on their end.

The Same-Taxpayer Rule

This is the one that catches people off guard most: the name on the sale has to match the name on the purchase. If you sell as a trust, you have to buy as that same trust — not as an individual, and not under a different entity.

If your situation involves an LLC, a trust, or multiple owners, this is something to sort out with your CPA and your Qualified Intermediary before you list the property, not after.

Why This Matters

Any one of these three missteps — a miscalculated boot, skipping a proper QI, or a mismatched taxpayer name — can undo an otherwise well-executed exchange. The good news is that all three are entirely avoidable with the right team in place well before closing.

If you're considering a 1031 exchange in Long Beach, the South Bay, or Orange County, I'm happy to walk through your specific situation and make sure your team is set up to avoid these pitfalls.

Frequently Asked Questions

What is a "boot" in a 1031 exchange? A boot is any value received in the exchange that isn't reinvested into the replacement property — including cash back at closing or a reduction in debt compared to the relinquished property. It's taxed immediately.

Do I have to use a Qualified Intermediary? Yes. A Qualified Intermediary is legally required to hold your sale proceeds throughout the exchange. Touching the funds directly, even briefly, disqualifies the exchange.

Can I buy the replacement property under a different name than the one I sold under? No. The "same taxpayer" rule requires the exact same individual or entity on both the sale and the purchase.

About Costanza Genoese Zerbi

Costanza Genoese Zerbi is a Broker Associate at eXp Realty of Greater Los Angeles and the founder of Costanza Genoese Zerbi & Associates. She is a RealTrends Verified Top Agent in Southern California — five consecutive years — with 600+ closed transactions and more than $500 million in career sales volume. She serves buyers and sellers across Long Beach, the South Bay, greater Los Angeles, and Orange County.

Contact: 📲 (562) 221-4527 🌐 costanzagz.com 📍 1650 Ximeno Ave Suite 300, Long Beach CA 90804 DRE #01941438