Hi. what is my depreciable cost basis after like kind exchange? Original rental property: 100,000 (Land: 20%, Building 80%). Accumulative Deprecation 30,000. 1031 like kind exchange. New properpty 200,000 (land 10%, building 90%) Now, what is my depreciable cost basis ?
old land 20,000 reduced by allocated deferred gain
old building 50,000 reduced by allocated deferred gain
new land 20,000
new building 180,000
It depends. Based on your information, you have traded for property of greater value than the property given up.
Rules for Section 1031 Trade:
To be clear, you continue the depreciation as though there was no trade. Then with any extra cash (or loan) that was paid for the replacement property (the property received in the exchange) you set up a new asset and begin depreciation in 2023 as residential rental property using 27.5 year recovery period (depreciation method).
If you buy up in your exchange (your New Property cost more than you sold your Old for), the answer is easy – you treat the additional cash part as you would a new addition to an existing property. In other words, you treat the amount of the buy-up the same as you would the cost of a capital improvement.
The assets (building and land) do not change in a tax free Section 1031like kind exchange. You add a new asset for the 'buy up', if any. The depreciation continues for the traded property as though it was never traded.
As long as you did not receive any 'boot' (assets of unlike property such as cash) then you simply add a new asset that starts depreciating on the day the trade is complete. It's not clear in your question if you received any boot or paid any additional cash for the replacement property.