Upon sale of the old property, Form 8824 Line 25, or Adjusted Basis of Received Property, takes into account any Capital Gain on the old or exchanged property, which will reduce the adjusted basis of the newly acquired property. My question had to do with whether or not the prior property's depreciation schedule followed and applied to the new property. The CPA's answer above indicated, YES, it does. Which means that when I sell the exchanged property, without doing another 1031 X, I will pay the piper on all of the recaptured depreciation, as well as reporting any capital gain (or loss) based on the adjusted cost basis at the time of the exchange.
That is my understanding of what will happen when I go to sell my property this year. It will be interesting to see if TT makes this accounting as easy as I think it should be. Without understanding the basic rules of 1031 X accounting, it might be hard to know if TT is doing it correctly, and thus my question. It would be great if a CPA out there could confirm my understanding of this upcoming sale.
