Like-kind Exchange Basis

From TaxAlmanac

In a like-kind exchange, there is relinquished property (property given up) and replacement property (property received). The basis remaining in the relinquished property is called exchanged or carryover basis. Any amount received in the exchange that exceeds the carryover basis is called excess basis or boot. The carryover basis and the excess basis comprise the total basis of the replacement property, as reported on Form 8824, line 25.

Temporary Regulations 1.168(i)-6T(b)(7) define the carryover basis as the lesser of the adjusted basis of the relinquished property or the basis in the replacement property. Paragraph (c)(5) states that the adjusted basis of the relinquished property is the original cost or basis less any prior depreciation plus any depreciation claimed on the relinquished property in the year of the exchange. However, for purposes of Temporary Regulations 1.168(k)-1T(f)(5)(G), in order to calculate the special depreciation allowance the carryover basis should not include the add-back amount of any current depreciation.