Hello Amy
3 concerns on your answer:
1) Wondering if you can double check the 2nd half of your example posted.
I found the concern when I ran your equations and found 2 different results, both can NOT be true:
Taken from your response:
" Excess Basis = purchase -exchange
Excess Basis = cost basis for new property - adjusted basis of building A"
2) The TurboTax Desktop Help when clicking on Excess Basis amount entry box seems to me to imply the NEW Mortgage Loan of Bldg B to cover acquired property amount due is Excess Basis. Seems a LOT MORE straight forward and logical.
As stated in the Desktop App copied here:
"Excess Basis Amount
When you trade in a business asset for similar property, it is considered a like-kind exchange, reportable on Form 8824.
In addition to determining whether you must report any gain this year on the disposition of the old asset, Form 8824 also computes your basis in the new asset.
Here, we're just asking how much cash you paid to acquire the item, above and beyond any other costs associated with the item. Also include any loans taken out on the item. This is the excess basis amount."
For those of us still learning about Depreciation Recapture & Depreciation on the NEW Acquired property, this google source is helpful to inform getting EXCESS BASIS value is very important to get accurate!
"The excess basis is the resulting increase in basis from the taxpayer's trading up in value. The excess basis will be treated as newly acquired property and will be depreciated over 27.5 years for residential property or over 39 years for nonresidential real property using a new straight line depreciation schedule."
3) The Carryover Basis is ok to depreciate over the remaining MACRS period, say 17.5 years, if the relinquished property was depreciated for 10 years?
Maybe I am lost, but this question Excess basis amount under "Tell Us More About This Rental Asset" is non-trivial if the calculation you provided is required and deserves more TT user help/support/documentation.
QUESTION: Due to the concern #1 above I went cross-eyed trying to understand excess basis with 2 equations and what I found online indicating additional basis/Excess Basis is simply the new money (eg Mortgage Loan). For Excess Gain, what are we really trying to solve for relative to the desktop app help explanation #2 above? Also, what specific IRS Forms and what LINE# are impacted by this Excess Basis answer result?
Found this external reference that is VERY close to my 1031 Like for Like scenario and now seems to mirror your explanation, I think 🤔 Depreciationof1031.pdf
Depreciation Scenarios:
EXAMPLE A - staying
under General Rule Sec 1.168(i)-6(i) EXAMPLE B - ELECT OUT--> Mark 8582 ELECTION MADE UNDER SECTION 1.168(i)-6T(i).
Thank you for your help!
