Investors & landlords

It depends. It's understandable the states would matter for the state return(s) accuracy to be simplified since the properties were in different states.  First it's important to know the status of your assets before and after the exchange.

• Current Asset (now belongs to the property received in the exchange): building and land -retains the same exact character, nothing changes including accumulated depreciation.
• New Asset (the buy up): Additional money paid in the exchange and/or improvements
• Land is already in the asset from the original property

You can begin a new rental property with the aforementioned in mind, i.e., enter them with a new name and/or address but with the exact numbers from the property traded. This will allow you to tax property A, to state A and property B to state B.

For the property given up (property A), you can indicate the following:

1. First use the Search (upper right) > Type rentals > Press enter > Click on the Jump to... link
2. Or Wages & Income > Rental Properties and Royalties > Update > Continue to Rental and Royalty Summary > Edit the property
3. Scroll to Assets/Depreciation  > Click Update > Select 'Edit' next to each asset
4. Edit beside each asset > Continue to the Tell Us About This Rental Asset
5. Select the checkbox beside 'This item was sold, retired, .... traded in ....etc. > enter the date it was traded (sold/retired)
6. Answer the question about whether it was 100% business > Leave the original date it was placed in service (may be purchase date or later depending on your circumstances)
7. Continue to the screen 'Confirm Your Prior Depreciation'  
   • The amount displayed is only for prior years and does not include the current year. 
   • Continue until you see the current year amount displayed and make a note to add the two amounts together for the Section 1031 like kind exchange.
   • This completes the asset portion of the trade.
8. Answer 'Yes' to Special Handling
9. Assumed that Form 8824 is already completed
10. Enter the new property as indicated in the bullets above.

Depreciation Rules:

The basic concept of a 1031 exchange is that the basis of your Old Property rolls over to your New Property. In other words, if you sold your Old Property for $100,000, and bought your New Property for the same, your basis on the New Property would be the same. It makes sense then that your depreciation schedule would be exactly the same, and does not change! In other words, you continue your depreciation calculations as if you still own the Old Property (your acquisition date, cost, previous depreciation taken, and remaining un-depreciated basis remain the same).

@lendy