Investors & landlords

This has been a lot to read through! I say start with the IRS 1031 information. You know your exchange basis of the property sold and divide it among the 3 replacement properties. 

1. The new property will always begin a fresh depreciation schedule based on its lifetime, commercial or rental. How the basis is calculated depends on which option you are using. The IRS gives you two options for handling the exchanged property. 

• You can enter 2 depreciation schedules, one continues to depreciate the original property while the second handles the new property However, TurboTax does not handle the two schedule system.
• The other option is to use the single schedule. You use the new adjusted cost basis which includes the old property and start depreciation with the purchase. The original property's depreciation is subtracted from the basis of the new property.

2. Because we are limited to the single schedule option, the math is much easier to me.

For example- just making up numbers here:

• Buy building A, original cost $250,000 (land included in price), depreciated $150,000, sold $400,000
• if sold, A would have gain of $300,000 but instead did a 1031 exchange.
• In your case, exchange for 3 properties. Sr living center is 18% of the total cost of new properties. The new basis is purchase price - 18% of the $300,000 gain that is being deferred.

3. Yes, in your case 18% of the deferred gain will be subtracted from your basis.

4. I believe you are trying to use the 2 schedule method - which won't work in TurboTax. Your old depreciation values are used to calculate the basis in the new property. The new property must begin a new depreciation schedule using the correct years for the property type. You will subtract out the land value of the new building to depreciate only the building now in use.

5. Ford ctr - same steps as above using 54%. This depreciation mismatch is exactly why you just have to use prior depreciation as an adjustment to the basis of the new property. The new property has a new depreciation schedule starting with its purchase and new adjusted basis.

6. Yes, the oil and gas property have a reduced basis and there is no depreciation schedule. You just maintain the records for the future.