The information you received is correct. The depreciation asset for the property given up in the Section 1031 exchange remains the same without change, including your improvements to the property given up. It must go forward for the new property as though it is the same real estate (you could rename it). You do not tell TurboTax the improvements were sold. They are part of the cost of the property received in the trade.
Any additional cash or funds paid in the exchange, above and beyond the property itself, is another and separate, distinct asset with the recovery period of 27.5 years, this can include any improvements to the new property received after the exchange in the year of the exchange.
For future tracking and records this is the simplest and most convenient way to move forward after a Section 1031 real estate exchange with the need to keep records of the actual exchange to show any additional funds paid for the new asset. The new asset will begin the depreciation recovery in the year of the exchange. The asset for the property given up keeps the same character with no changes.
TurboTax can handle this easily and your time factor can be significantly less for your tax return.
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