Hello Diane,
Can you please confirm my understanding of your comments if you could be so kind:
- Keep the Relinquished property as an asset with its original acquisition date. Taking the remaining basis of $90,000 to be eventually allocated proportionally across my 3 DST Replacement properties.
- Calculate any additional basis associated with my 3 Replacement properties. Per TurboTax, it is calculated as the Debt incurred across my 3 Replacement properties ($243,000) minus the Loan amount ($125,000) from the Relinquished property. The additional basis comes to $118,000
- Together, the entire basis (Exchange Basis) of $208,000 will be proportioned across the 3 Replacement properties.
- Now assume I am building the 3 Assets (only building 1 additional Asset for each Replacement property) in the Rental Property section (to build the Schedule E). When I come to the Cost field for each Asset, I will enter in each respective portion of the $208,000 Exchange Basis. Correct? However, when it comes to the cost of the land - for example, say 5% of the total cost - Is that 5% of the Asset's portion of the $208,000 Exchange Basis?
- One of the Replacement properties is an Oil and Gas Royalty based DST. There is not a land cost field when building the Asset for this property, as it is treated differently because it is all land in the first place. For this Asset, I only populate the proportioned Exchange Basis. Please confirm.
- In the same section it asks for the Excess Basis. Is the correct formula as follows: Asset's Fair Market Value (equity and debt) minus the Assets portion of the Exchange Basis. So when I look at Replacement property 1 in my example, it is $250,000 minus $24,930 to equal $225,070. Is that correct? Then for Replacement property 2 it is $493,000 (both equity and debt) minus $49,140 to equal the $443,860 of Excess Basis. Correct?
- After I populated the Excess Basis for each of the 3 new Assets, when I looked in the forms view, the Excess Basis field for each of the 3 Replacement properties was flagged as having an error. Is that indeed an error, or is this the result of doing a 1031 Exchange with more than 1 replacement property. If it is indeed a mistake, how can it be corrected? What should I validate?
- Please confirm, after I complete the process, I should have only 4 line items on the Rental and Royalty Summary page, representing the 1 Relinquished property and the 3 Replacement properties. For each of three Replacement property line items, there will only be 1 Asset associated with them in which I use the proportional Exchange Basis and proportional Excess Basis. Is that correct?
Please let me know if I need to clarify any of my points/questions.
Again, I so greatly appreciate your help Diane!
Thanks,
Jamie
