I’ll first apologize to my lengthy inquiry. However, I believe providing real information with hopefully real answers provided by tax experts will assist myself and others in understanding how to file taxes for a Relinquished vs. 2+ Replacement properties, as well as how to work with DST 1031 investments.
Relinquished Property
Replacement Properties (3) – DSTs (using my numbers rounded as an example)
$903,000 = Total Replacement Cost
Property 1 = Oil & Gas DST
Property 2 = Ford Distribution DST
Property 3 = Senior Assisted Living Facility DST
Questions:
PART-1
PART-2
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Yes, you have calculated the correct basis to apportion to all three buildings you received in the section 1031 like kind exchange. ($208,000). Read the information next.
Hello Diane,
Thank you for taking the time to answer all of those questions!
I'll look over your comments today and let you know if I have any additional questions.
I do have one question now. Is someone like yourself able to become a Live Agent to assist in a similar fashion as a TurboTax CPA with the TurboTax Premier Live offering? Is someone able to specifically request your assistance?
Thanks!
Jamie
Yes, you can request TurboTax Live if you are using TurboTax Online by following the instructions in the link below.
You are not able to specifically ask for me, but we have tax experts who have all the experience you will need to assist you.
Hello Diane,
Can you please confirm my understanding of your comments if you could be so kind:
Please let me know if I need to clarify any of my points/questions.
Again, I so greatly appreciate your help Diane!
Thanks,
Jamie
@DianeW777 Hi Diane, I just wanted to see if you saw my follow-up questions? Or perhaps @AmyC might know as well.
Any additional help would be greatly appreciated!
Thanks!
Jamie
Please see the answers to your questions below.
Hello Diane,
Thank you for all of those additional details!
From what I understand from your comments, you are suggesting to apply a "two schedule" depreciation method for each of the replacement properties. In this setup, each property will have 2 assets, as you described. The first asset can be replacement property A as it is tied to the exchange basis from the relinquished property, with its portion of the $90,000. The 2nd asset would be replacement property A as it is tied to its portion of the additional basis ($118,000) created by the added cost/FMV between the relinquished property and the 3 replacement properties. Did I understand that correctly?
Questions:
Again Diane, thank you so much for your must needed assistance!
Thanks,
Jamie
Sorry Diane, another question, as it relates to the "two schedule" depreciation approach.
6) How would I figure out the Excess Basis value as it relates to the original basis ($90,000) being proportioned across the 3 replacement properties, and the Excess Basis value as it relates to the additional basis ($118,000) being proportioned across the 2 properties (if the Oil and Gas property needs to be excluded in this case) ? When I calculate the Excess Basis as two separate calculations, the total far exceeds the total deferred gains and the number I had when using the "single schedule" depreciation method. Do I need to somehow proportion out the replacement property's total costs/FMV between the original basis ($90,000) and the additional basis ($118,000) BEFORE doing the Excess Basis calculation? Right now I am using full values for both calculations. So as an example, in the case of the Ford Distribution property, having a value of $493,000, I'm using $493,000 minus Ford's original basis proportion of the $90,000, AND I'm using $493,000 minus Ford's additional basis proportion of $118,000. Should that $493,000 be first split up somehow?
Any insight here would be so greatly appreciate!
Thanks so much!
Jamie
There are only two total assets for depreciation.
In your situation you have a property received that has no building, so for this reason you must apportion the land value appropriately to each of the three properties you have now. Do this in a method that makes sense based on the acreage.
The buildings on two properties will also need to be apportioned appropriately in a method that makes sense (some ideas provided earlier in this thread). For the buildings each will have two assets:
it will be easier if you apportion the original building and land now to each of the properties received versus waiting until one of then is sold or traded later.
Good afternoon Diane,
Thank you once again for your great comments. I'll need a little time to digest things, but you did give me another variable that I need to include in this process - the land value of the original Madison property. This is a point that I failed to include in any of my numbers. Thank you for highlighting that!
Another question that you might not have seen was #6 dealing with Excess Basis calculations (please see in earlier message). I'd greatly appreciate it if you could give me some thoughts on how that should be calculated with 2 different basis numbers to consider.
Thank you so much!
Jamie
Good evening Diane,
I think I am slowly going in the correct directly. I could never have come this far with your dedicated help! Thank you so much for this!
I’ve tried to break down the discussion by Property. Hopefully it makes all of the details easier to digest and follow.
Replacement Property 1: Oil and Gas
Replacement Properties 2 & 3: Ford Distro Center and Senior Living Center
Your comments would be so greatly appreciated!
Thanks,
Jamie
The answers to your questions are prepared in sequence to better assist you.
Replacement Property 1:
Replacement Properties 2 & 3.
Good morning Diane,
Thank you once again for providing your valuable insight! I'll walk through through your comments today and start applying your recommended changes in the TurboTax program. I do have a quick follow up questions:
Thank you so much!
Jamie
No, if you do not own the land and only the mineral rights then no amount of the assets should be applied to land for the oil & mineral property. It was not previously clear there was no land ownership with this property.
Yes, the additional basis should be applied to all three properties because they are all tied to your original property traded in the transaction. All cost basis belongs to all three properties.
I would suggest that you enter the assets as purchased and do not enter the excess amount for these properties. In stead complete the assets as we discussed and then complete your Form 8824 for the like kind exchange.
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