!031 Basis calculation on Replacement Property

[cottagecharm11]

We did a 1031 Tax Exchange for the 2021 tax year. We built a new house for the replacement rental. The new rental was finally placed in service in August of 2022. According to our 1031Form 8824,  the line 25  basis of the like kind property received is $175,000. Do we need to deduct the cost which was $75,000, that we paid for the 60 acres of land that the new replacement property sits on from the $175,000 basis in order to determine the basis for depreciation of the new rental?

[AmyC · Accepted solution]

Yes the program will, no you don't. Land is not depreciated. When you enter the rental property, the program will ask for the cost, enter your new actual basis in the property. The next question is value of land, enter the land value. The program will do the subtraction for you and calculate the depreciation.