Investors & landlords

@DianeW777 

Good morning Diane,

Thanks for the clarification.  I think I am slowly learning that preparing your taxes is more like an artform than a science.  🙂

Here are my thoughts for next steps based on our discussion:

Original Basis from Relinquished Property:

1. Apportion the cost/value of the asset/improvement, land, and prior depreciation to all 3 replacement properties using the same method - using each replacement properties value as a percentage of the entire replacement cost.
2. For the 2 oil and gas properties, those apportioned values will for all intensive purposes reside outside of the tax return, to be used once those properties are sold or exchanged for another property.

Additional Basis from Replacement Properties:

1. Once I subtracted the remaining loan amount of the relinquished property ($107k) from the loan amount of the convenience store replacement property ($118k), I only have $11k of additional basis that can be used.  (no loans on the 2 oil and gas properties)
2. I then broke up the $11k across the 3 replacement properties using the same method from above - using each replacement properties value as a percentage of the entire replacement cost.
3. Here's where I run into questioning my approach in regards to apportioning the land.  As we know, the convenience store is the only property that has land, and it is worth 20% of the total value of that property.  Right now, I am assigning the land a value of 20% of the total $11k additional basis, which equates to a $2.2k land value.  I am then subtracting the $2.2k land value ONLY from the convenience store's portion of the $11k additional basis; which is $2.8k minus $2.2k equaling $600 that can be depreciated.  I am not assign any of the land value to the 2 oil and gas properties.
   1. Is this correct?  Should that 20% land value be applied against the entire $11k additional basis number, and the convenience store has to absorb its land portion AND the land portion that would have been allocated to the 2 other properties if they were not mineral rights? 
   2. OR, is the land value calculation really taking 20% of ONLY the convenience store's portion of the additional basis number; which would be 20% of $2.8k equaling $560? 
   3. If #2 above is true, is the entire $560 land value assigned to the convenience store, OR it is split up across the 3 properties?

Your thoughts on the above steps/questions would be so greatly appreciated Diane.

Thanks so much!

Jamie