Partial 1031 boot question

[Mark Hughes]

Partial 1031 question here for the tax gurus. Long post. Not asking tax/legal advice, just want to understand theoretical concept between the 3 options i outlay below. Looking to do a partial 1031 and want to understand the different of cash boot versus mortgage boot and how those work together or in combination if so.

My situation. I purchased an investment property in 2020 for 311k with a $230k mortgage using a 1031 from a another property and in essence deferred $85k of taxes into this property. Therefore my basis in the property was approx $230k after closing costs but I have also put $20k into capital improvements (insulation, appliances, remodeled flooring, appliances, etc) over the last 2 years so that brings it up to $250k total basis right now.

I now considering selling this property again. The wife wants to pay down debt on some other properties and I want to 1031 to keep investing so it occurred to us to meet in the middle and do a partial 1031 to avoid some taxes, buy another like property for say 1/2 of the amount and take cash and pay taxes on the 1/2 boot and want to understand that.

If I sell for $550k that would yield approx $500k after selling fees (trying to keep at simple/round numbers for simplicity). If there’s $220k mort left on the house then I’d have approx $280k in cash to work with that would go to the 1031 intermediary. Assuming I would fall into the 15% long term capital gains rate for this tax year that I’d sell in how would these options play out.

Option 1: if I buy one property at $293k total price w a loan of $221k I would only use $72k of the cash towards down payment and have another $208k that would be paid in “boot” to me. Is that full $208k have the LTCG tax on it for approx $31k + depreciation recapture? (But I’ve replaced the loan so would be good on debt amount)

Option 2: if I buy one property for cash at $281k I’ve used all the cash amount but still think I would have boot mortgage as I didn’t use the any debt amount of the $220k I had previously. So would I pay 15% LTCG tax on the boot mortgage amount for approx $33k + depreciation recapture?

Option 3: here’s the fun question: if I buy one property for roughly same amount let’s say $281k but use half cash and half loan I’d only use $140k of the $280k cash and also only get $141k mortgage compared to the $220k before.

So is my tax combined between both cash boot and mortgage boot? (Cash boot $280k - $140k = $140k x 15% = $21k) AND (Mortgage boot = $220k-$141k = $79k x 15% = $12k)

For a total of approx $33k + depreciation recapture?

If that’s so it basically doesn’t matter which option I’d do I would owe approx $32k in tax?

If I didn’t use 1031 at all and just cashed out I think it would be around $40k in taxes ($500k-$250k basis) so why would replacing approx 1/2 the value still result in 3/4’s of the tax? What am I missing?!?!

TIA - Mark