The relinquished property has 1.1 years of depreciation from filing as rental ONLY in 2009-2010. There is no (Sch E) exist in TT section "Wage & Income > Rental Property and Royalties ". I do have 2010 sch E worksheet which has the total depreciation taken.
I have 5 Questions:
Question 1 - Could someone confirm that 1031 exchange is allowed since the property has not been used as primary or secondary or personal use for the past 5 years?
Question 2 - Could someone confirm that un-claimed allowable depreciation from 2011-2023 is not problematic with the IRS, since depreciation could not be claimed without having FMV rent?
Question 3 - Is it the right approach to 1st start with the Relinquished and Replacement exchange step and then go to the Rental income/expense/depreciation section?
1st step - Enter the 1031 exchange for relinquished and the replacement property:
I started with "Wage & Income > Business Items > Sale of Business Property > Start"
- a) Check "Any additional like-kind exchanges", then "Add an Exchange"
- b) Enter gave up property: (HI residential)
- address (HI),
- 12/01/09 = acquired date
- 08/01/24 = date transferred
- 480,000 = adjusted basis (land and building purchased price - total depreciation taken)
- 1,000,000 = FMV of property you gave up (gross or contract sold price)
- 250,000 = mortgage/loans paid off part of the sale
- 20,000 = Total Depreciation taken (additional information for completeness)
- c) Check "The like-kind property I exchanged was used in a trade, business, or rental"
- d) Enter like-kind received: (MD DST commercial)
- address (MD)
- 1,050,000 =FMV property received
- 12/01/24 = date received
- 09/01/24 = date identified
- 300,000 = loan assumed
- e) Click "No" exchange to related party
- f) Click "No" Different property given up
- g) Enter Exchange expense
- 56,000 = sales expenses (tax, fee, attorney, escrow, QI fee)
- h) TT says - No Taxable Gain
- i) TT says - New Property Basis
- 586,000 = New Property Basis
- 586,000 = Basis of like-kind section 1250
2nd step - Enter depreciation for the Replacement Property:
From "Wages & Income > Rental Properties and Royalties > start > Add an Asset", enter in the Replacement Property
- Mark - Rental Estate Property
- 12/01/24 = Date Purchased (Replacement Property MD)
- Mark - Nonresidential real estate
- 1,050,000 = Cost (Replacement Property MD)
- 105,000 = Cost of land (don't know. Just use 10% same % as the Relinquished property)
Question 4 - In this step, I don't know what I should check?
- a) Mark - I traded in an old asset to acquire this one (this is not common) ?
or
- b) Mark - I purchase this asset?
or
- c) Mark - None of the above?
Question 5 - If I chose any a), b) or c), I see the same depreciation (1,010). This number does not make sense. Purchased building (945,000) / 39 / 12 months = 2,019. Why is it 1,010? In addition, this seems wrong. I thought the new property (MD) should only account for the capital gain deferred + additional money put in (assumed a higher loan + purchased price is higher than relinquished price). Please help shed some light to this.
