How to handle unused depreciation on improvement when selling rental property in 1031 exchange?

[hooly]

I did a 1031 exchange when i sold a rental house. New windows were installed 10 years previously. How is the unused depreciation handled? The house was already fully depreciated.

[tagteam]

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@hooly wrote:

How is the unused depreciation handled? 

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Depreciation deductions are deferred and the remaining basis can be essentially transferred to the replacement property. Alternatively, the asset can continue to be depreciated separately.

[hooly]

When I say:  sold or disposed of this item...it then asked me what i received for it.  I put -0-.  Then it shows a loss of the remaining amount of the item.  Should I put the amount here that is the remaining portion that is not depreciated?

I was going to to move it to the new property to continue to depreciate there.

[tagteam · Accepted solution]

How did you handle the exchange in general?

Are you using separate depreciation schedules for the replacement property or are you treating the replacement property as a new asset for that purpose (see link below for an explanation in plain English).

https://www.fool.com/millionacres/taxes/depreciation/depreciation-after-1031-exchange-how-it-works/

You should treat the improvement consistent with your overall approach.