Discussion:Cost segmentation / Segregation / Section 1031 Exchange...

You have to separate the 1031 out into parts: like kind for like kind.

thus you may have 7 or 8 1031's - assuming he had §1245 property relinquished

the bad news is that he probably woulnd't have had boot without the cost segregation study.

(a) Realistic possibility standard. A practitioner may not sign a tax return as a preparer if the practitioner determines that the tax return contains a position that does not have a realistic possibility of being sustained on its merits (the realistic possibility standard) unless the position is not frivolous and is adequately disclosed to the Internal Revenue Service. A practitioner may not advise a client to take a position on a tax return, or prepare the portion of a tax return on which a position is taken, unless-- (1) The practitioner determines that the position satisfies the realistic possibility standard; or (2) The position is not frivolous and the practitioner advises the client of any opportunity to avoid the accuracy-related penalty in section 6662 of the Internal Revenue Code by adequately disclosing the position and of the requirements for adequate disclosure. (b) Advising clients on potential penalties. A practitioner advising a client to take a position on a tax return, or preparing or signing a tax return as a preparer, must inform the client of the penalties reasonably likely to apply to the client with respect to the position advised, prepared, or reported. The practitioner also must inform the client of any opportunity to avoid any such penalty by disclosure, if relevant, and of the requirements for adequate disclosure. This paragraph (b) applies even if the practitioner is not subject to a penalty with respect to the position. (c) Relying on information furnished by clients. A practitioner advising a client to take a position on a tax return, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete

Is there NOTHING he has added while he has owned it that is §1245? Check his depreciation schedule, then look for like-kind property in the replacement property cost segregation report.

it would be nice for our Cost Segregation experts to give their input here.

So I think the situation IS different, DT.

Because the cost seg. separates what?

It does not separates non-real from real, cost seg. separates non-structural components from structural components.

Real property is still real property.

My opinion as to actual tangible property acquire in the cited exchange would be that was boot. Hotels, restaurants, farms are the type of real property that could have tangible property in the exchange.

In the original complex the buildings were not cost segregated.

Can I now cost segregate the appliances without hurting the 1031 exchange?

one for the real estate

one for each class of other assets (appliances for appliances)

Thanks for helping me think this through!

Sec. http://www.taxalmanac.org/index.php/Reg._1.1031(a)-1 (b) Definition of “like kind.” As used in section 1031(a), the words like kind have reference to the nature or character of the property and not to its grade or quality. One kind or class of property may not, under that section, be exchanged for property of a different kind or class. The fact that any real estate involved is improved or unimproved is not material, for that fact relates only to the grade or quality of the property and not to its kind or class. Unproductive real estate held by one other than a dealer for future use or future realization of the increment in value is held for investment and not primarily for sale. For additional rules for exchanges of personal property, see §1.1031 (a)–2.

Tangible Property ----- Classes for 1031

(3) PRODUCT CLASSES. Except as provided in paragraphs (b)(4) and (5)

    of this section, or as provided by the Commissioner in published 
    guidance of general applicability, property within a product class 
    consists of depreciable tangible personal property that is described 
    in a 6-digit product class within Sectors 31, 32, and 33 (pertaining 
    to manufacturing industries) of the North American Industry 
    Classification System (NAICS), set forth in Executive Office of the 
    President, Office of Management and Budget, North American Industry 
    Classification System, United States, 2002 (NAICS Manual), as 
    periodically updated. Copies of the NAICS Manual may be obtained from 
    the National Technical Information Service, an agency of the U.S. 
    Department of Commerce, and may be accessed on the internet.