Let's back up. I don't know the recovery period or depreciation method for either property. Those factor in to how to handle the new property if using the two schedule depreciation option.
Let's start with the basis of the new property.
Example:
- Buy building A, original cost $250,000, depreciated $150,000, sold $400,000
- if sold, A would have gain of $300,000 but instead did a 1031 exchange.
- Buy building B for $500,000.
- Cost basis for new property B is $500,000 - prop A gain $300,000 = $200,000
There are two ways to handle depreciation after a 1031. Turbo Tax only handles one method, the single schedule depreciation. It is simple, you take your new adjusted basis, begin depreciation fresh on the new property based on the type of property.
Take a look at the Journal of Accountancy article here for other issues.
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