As it was explained to me above and with a CPA (nephew took mercy because he knows it's complicated) you have a choice as to end the depreciation of the relinquished property and start anew when you do an exchange. Or you can carry over the depreciation from the sold property unto the new one. TT doesn't support these choices so my work around was to add the original depreciating items of my relinquished property into the new property but using the original date entered into service and purchase amounts. When I did so TT calculated the depreciation correctly. I did require removing all "evidence" of selling the relinquished house which took some digging.
