Discussion:Account setup after 1031

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Discussion Forum Index --> Accounting Questions --> Account setup after 1031

Leo111 (talk|edits) said:

16 February 2007
I am trying this again. Hope someone can answer the questions.

Leo111 (talk|edits) said: 

9 February 2007

I just bought a commercial property as a completion of a 1031 exchange, but I don’t know how to setup the new accounts for my new business in accounting book. Following are the facts (easy numbers for simplicity):

Sold Property:

Sold Price $10,000

Building cost $5000

Land cost $2000

Total building and land $7000

Adjusted bases for building $4000

Adjusted bases for land $2000

Adjusted bases building and land$6000

Cumulated depreciation $1000

Unrecognized gain for 1031 $4000


Purchased property:

Purchase price $20000

Building value $15000

Land value $5000


I paid additional $10000 out of my personal funds. Following accounts are what I tried to setup. Entries with a “?” mark are where I am seeking help for and your help will be greatly appreciated. Also I don’t even know if these entries are correct. Please feel free to give any suggestions.


Debit building $4000; credit (???) $4000

Debit land $2000; credit (owner’s equity?) $2000

Debit (cash?)$4000 ; credit (owner equity?) $4000


Well, these accounts and entries take care of the carry-over basis. It fulfills the IRS requirements but what about the new property I purchased? My book should have entries for the new property, right? Should I enter the difference between the old and new property? Are following correct?


Debit additional building $11000; credit(owner equity?) $11000

Debit additional land $3000; credit (???) $3000


Even if they are correct, it seems that I will permanently lose the information for the new property? Is there any way to record the new purchase, then adjust to reflect the true basis? Please help.

Kevinh5 (talk|edits) said:

16 February 2007
For tax purposes, you continue to depreciate the old property under the old rules. Additional boot paid creates a new asset (you might have to allocate to land and building) which you start to depreciate under the rules at the time of the exchange. So you would have 4 line entries (2 for building and 2 for land). Make that 5, because you have accumulated deprec on the building. Maybe this description will help you think through the numbers.

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