Discussion:1031 exchange and rental basis for depreciation
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Discussion Forum Index --> Basic Tax Questions --> 1031 exchange and rental basis for depreciation
Discussion Forum Index --> Tax Questions --> 1031 exchange and rental basis for depreciation
Www.cpa1.biz (talk|edits) said: | 23 June 2008 |
| Almanacers,
A client did a 1031 exchange from rental property to another. As reading the code on this, the new basis is the old basis of the original property exhcnaged. Does this mean the new property exchanged for remains to keep the old property's basis for depreciation purposes? Please keep me informed. Thanks, Bj | |
| 23 June 2008 | |
| I think you misread the law. The new basis is made up of the exchange basis and the excess basis. The exchange basis will be the same as the old basis. The exchange basis is depreciated over its remaining MACRS life. The excess basis is depreciated as a newly acquired asset. | |
| 23 June 2008 | |
| Would he not under Reg. 1.168(i)-6(i)have the option to make an election to combine the exchanged basis and excess basis into one asset for depreciation? That is to say, only the replacement property remains for depreciation. | |
Www.cpa1.biz (talk|edits) said: | 23 June 2008 |
| It seems like both of these methods give the same results if they are in fact the same type of property, which would be because they are 1031 property. I see you what you are saying though Riley about summing the exchanged excess basis. This would seem kind of weird on a schedule E, where as what Soloman is talking about would seem like a normal and understandeble.
If was to show for tax purposes what Riley is talking about, would I show two different assets basis with two different depreciation amounts or combine the two on the schedule E and show depreciation as a whole? | |
| 23 June 2008 | |
| "If was to show for tax purposes what Riley is talking about, would I show two different assets basis with two different depreciation amounts or combine the two on the schedule E and show depreciation as a whole?"
If you do not make the election, the detail on the depreciation schedule would show the exchanged basis and excess basis separately - the exchanged property and the replacement property. Your software should combine the two into one depreciation amount for Sch E. There might not be any excess basis if no boot or expenses involved. | |
Www.cpa1.biz (talk|edits) said: | 23 June 2008 |
| I understand Solomon. Thanks for the assistance. | |
