@DianeW777
Good morning Diane,
I apologize, but I'm not quite able to connect the dots, even with the example. If we could, let's walk through the easier of the 2 replacement properties with the structures, the Senior Living Center, which has the same depreciation schedule of 27.5 years as the relinquished property. Using rounded numbers, $16,000 of the $90,000 original basis (associated with the structure) was apportioned to this property. To simplify the example, in TurboTax I changed the date for acquisition and start of business use to 1/1/2004, resulting in 18 years of the 27 1/2 depreciation schedule used, leaving 9.5 years remaining. TurboTax in turn systematically calculated a prior depreciation of $10,452 and a depreciation expense of $581 for 2022 and future years. If we multiply the $581 by the remaining 9.5 years, that comes to $5,519.50. When I add the prior depreciation of $10,452 to the $5,519.50 projected depreciation for the remaining 9.5 years I get $15,971.50; which is within the apportioned basis of $16,000. So it seems like TurboTax calculated it correctly, and I should be able to expense $581 for 2022 and future years without having an excess depreciation.
However, when I apply my calculated $28,000 value as the prior depreciation using the Senior Living Center's 18% portion of the $158,000, the depreciation expense gets zeroed out (going from $521 to $0). This doesn't seem correct, as how could you have a prior depreciation that is more than the basis itself? The Federal check, which flagged the $28,000 as an error, seems to confirm that $28,000 is not the right number; and suggested $18,000, which is the $16,000 structure basis plus the $2,000 of land basis allocated to the Senior Living Center from the relinquished property. But the $18,000 doesn't seem correct either, as shown in the paragraph above.
I'm not sure what I am missing here. Your thoughts would be greatly appreciated.
If I can understand how the Senior Living Center works, which shares the same 27.5 years as the original relinquished property, I think I can better understand how the Ford Distro Center will work, with the 39 year depreciation schedule.
Thanks so much!
Thanks,
Jamie
