it depends. All the depreciation from Property A carries over to Property B, which is why there is any deferred gain in the 1031 exchange. The property for your tax return only changes in name and then possibly an additional asset is added for the increase in additional funds paid or loan transferred to you.
If you have a deferred gain figure, it could be the depreciation you used on Property A. Property A was not required to be entered or treated as a sale because under the tax law it was allowed to receive Section 1031 like kind exchange treatment. This reduces the cost basis in the property given up, which transfers to the property received. Plus a possible additional asset for any 'but up'. Not it sells and there is no trade, the sale is treated like the firs property was never given up and all gain is captured as a taxable event.
I hope this provides a clearer picture. Please add any additional questions here for assistance.
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