@DianeW777
@AmyC
Good afternoon Diane,
I hope that you are doing well.
It has been almost a year since you and AmyC helped guide me through completing the 1031 exchange portion of my 2022 tax return using the TurboTax Premier software. I never could have managed to successfully file my taxes using your “2 schedule” approach without your assistance!
As I initiate my 2023 tax return I am faced with a similar challenge to last year. However, it has a slight twist that I’d greatly appreciate your insight on. At the highest level, the apportioned basis to Replacement Property 2 (which is a convenience store/fuel center) is calculated out to be a negative value, and I do not know how to account for that. I believe it all stems from the fact that because the 2 other replacement properties (properties 1 & 3) are mineral rights (with no land ownership) I am unable to allocate any of the relinquished property’s land to them, and thus it all goes to Replacement Property 2. However, I still have to fairly allocate the original basis of the Relinquished Property across all 3 replacement properties - even though I cannot use that basis for the properties with the mineral rights. Here is how I got there:
Relinquished Property:
- $320k cost
- $64k land value
- $166k prior depreciation
- $89k remaining basis
Replacement Property 2:
- $84k apportioned cost
- $64k apportioned land value
- $44k apportioned prior depreciation
- Calculation = $ Apportioned Remaining Depreciable Basis = (Apportioned Cost minus from (Apportioned Land Value from Relinquished Prop + Apportioned Prior Depreciation from Relinquished Prop)
- $84k – ($64k + $44k) = -24k
To note, the additional basis coming from Replacement Property 2 (which has a structure that can be depreciated), after being allocated across all 3 properties, is not enough to offset the negative basis coming from the Relinquished property for Replacement Property 2.
What do I do when it is a negative basis value? Do I enter the -24k, or the value $0? How is this usually handled?
Any guidance here will be greatly appreciated!
Thanks,
Jamie
