@DianeW777
Hello Diane,
Thank you so much for your follow-up!
I'm now finding these 2 recommendations in conflict:
- From last year's correspondence:
- "No, if you do not own the land and only the mineral rights then no amount of the assets should be applied to land for the oil & mineral property. It was not previously clear there was no land ownership with this property."
- From this year's correspondence:
- "NOTE: **** Although the actual trade did include mineral property, the land must be a factor that must be used in the formula to arrive at the correct amount for purchase of the mineral property regardless of the fact it cannot be depreciated or be called land."
I agree, if I can allocate a good portion of the $64k from the relinquished property to the 2 oil and gas properties it will solve for the negative depreciable basis for the convenience store. I could use each replacement properties value as a percentage of the entire replacement cost to apportion that land. In the case of the convenience store, its value is only 26% of the whole. Thus only 26% of the $64k land value of the relinquished property would be tied to the convenience store; or $16.6k. Please let me if I misunderstood you last year, and this is possible.
Last year I did not have to apportion any land to the single oil and gas property to have a positive depreciable basis for each of the 3 replacement properties. More-than-likely this is due to having assets and land on 2 out of the 3 properties which accounted for about 72% of the overall replacement value. Based on your most recent reply, please let me know if this wasn't the correct (or best) decision. Allocating some of the land value to the single oil and gas property would provide more depreciable basis to the 2 other properties with assets that can be depreciated.
Thanks again Diane for your great insight!
Jamie
