How to enter sec 1245 property in asset worksheet?

[gdstuart1]

The Asset Entry Worksheet has letters in the dropdown for the various asset classes.  Which one do I choose to enter Sec 1245 property?  I have a Delaware Statutory Trust investment and the assets are broken up into four classes:  Land [no deprec];  Buildings [Type I, 27.5 yrs. MACRS];  Land Improvements [Type H, 15-yr MACRS];  and the fourth group is "Sec. 1245 property items (generally attached to the building) that qualify as real property for 1031 exchange purposes but have a 5 year life for depreciation purposes."

So I must enter the latter three assets (excluding the land) in three different Asset Entry sheets, right?  The first two are not a problem, but I need help determining which TTax letter (A, B, C, D, E1, E2, J1 thru J6, etc.) I should specify for the Sec. 1245 property.  Making a bad guess will screw up the calcs for this asset and cause aggravation when I sell.

Thanks!

[Anonymous_ · Accepted solution]

Exchanges of personal property (Section 1245 property is tangible or intangible personal property) no longer qualify for like kind (1031) treatment after tax reform (the TCJA).

[gdstuart1]

Thanks, that's good to know.  But does that mean that I can't depreciate these assets?  It's a significant number (>$100K).  

[Anonymous_]

The assets (tangible personal property) are definitely depreciable if used in a trade or business or for the production of income.

[gdstuart1]

OK, so I'll enter them in a separate Asset Worksheet.  I decided to code them as F - Rental Furnishings.  But what does the 1031 status have to do with this?  Are you referring to the additional bonus depreciation offered by the 2017 TCJA?  The accountants who prepared a Cost Segregation Study that I'm basing my depreciation on did mention that, but they of course were vague because they can't give tax advice.  Language from their report is below.

Thanks!

In addition, the Tax Cuts and Jobs Act of 2017 provides for additional bonus depreciation of up to 100% of certain property placed in service and acquired after September 27, 2017. These provisions may provide additional benefits to investors, especially those not following a 1031 exchange transaction. Details concerning such amounts are provided in the full report of the cost segregation study prepared by MS Consultants, LLC and should be brought to the attention of the investor's tax and legal advisors for further consideration.
Please note: The illustration provided above is general in nature and is intended for educational purposes only. Details surrounding any investment in DST interests should be provided to your own tax and legal advisors for advice and guidance regarding your particular situation.

[Anonymous_]

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@gdstuart1 wrote:

OK, so I'll enter them in a separate Asset Worksheet.  I decided to code them as F - Rental Furnishings.  But what does the 1031 status have to do with this? 

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I am not sure what you are asking or, rather, why. 

My point was simply that the TCJA eliminated personal property as a candidate for 1031 treatment, which left only real property as property qualifying for like-kind exchanges.

Of course, you can depreciate the personal property or even expense the assets if they qualify.

[gdstuart1]

Sorry if I was unclear.  The TJCA change would only come to bear if I was exchanging this unit (really, a DST property) for another property, correct?  Since I'm only concerned at this time about how to enter this newly-acquired property into my TTax records for my 2021 return, I just want to make sure that the TJCA change doesn't impact this activity.

Please realize I'm not an accountant, so I have to take these things one step at a time.  Next up is the task of entering the sale data for my relinquished property, which I will no doubt have questions about.

Thanks again for your assistance.

[Anonymous_]

Yes, @gdstuart1, you are correct.