@DianeW777
Hello Diane,
Seeing there was so much going on with last year's numbers, I thought it would be easier to clear things up on my side with a new example. Therefore, in reference to that example (recaptured below), I have these comments/questions:
- Are steps 1-3 correct in terms of calculating the additional basis, which you've referred to as "up-charges"? Please confirm.
- If yes, assume we portion 30% of that $150,000 up-charge to Replacement Property 1. In turn, the total cost allocated to Property 1 would be $45,000. Please confirm.
- If yes, then the $45,000 needs to be split up to represent the asset and a portion set aside for land. Please confirm.
- If yes, and we assign the land value at 20% of the overall cost of Property 1, then $9,000 of that $45,000 would be allocated to land. Please confirm.
- If yes, then the Asset's Cost field would equal $45,000 and the Cost of Land field would equal $9,000. In turn, the depreciable basis would be $36,000 ($45,000 - $9,000) and not $45,000 ($54,000 - $9,000). Please confirm.
Here is that example again:
- Replacement Properties' New Loan Amount = $250,000
- Relinquished Property's Remaining Loan Amount = $100,000
- Additional Basis to allocate across Replacement Properties = $150,000
- Replacement Property 1 value as a percentage of all Replacement Properties = 30%
- Replacement Property 1 Apportioned Additional Basis: 30% * $150,000 = $45,000
- Replacement Property 1 Land Value of Property 1 Purchase/Cost: 20%
- Replacement Property 1 Apportioned Additional Basis allocated to Land: 20% * $45,000 = $9,000.
Thank you for the details on how to calculate the depreciation of an asset. Very helpful!
Jamie
