I too have been wrestling with the HOW portion of this issue for a while now. Here's what I am thinking of doing. Open to feedback on this idea:
Rental A has been depreciating for 10 years. I sold it in 2020 via 1031 Xchg but bought a lower priced replacement property (I have no issue with paying a little boot). My thought is to simply rename the Schedule E name for the relinquished property to "999 Elm - LKE - to 555 First" but leave the depreciation schedule as it was, but add a line item to represent the remodel costs incurred to start up the the new rental (555). Then create a new Schedule E item called "555 First" but only use it to track the income and expenses (no depreciation) for the new property. Since I received partial year rents for each property, I can then put them under their respective Schedule E columns. But when I get to 2021 Tax Year, I think I can simply eliminate the new 555 entry from Schedule E - and enter all rents and expenses on the original 999 Elm - LKE - to 555 First Schedule E column - but rename it simply to "555 First". This seems to me to retain all existing depreciation schedules, allow me to add the new schedule for the initial remodel, and keep the rents segregated in the 1 year where I have both. Thoughts?
