We sold our rental in 2021 and filed Form 8824 for the 1031 Tax Exchange. We placed the replacement property into service in 2022. When I entered information about the replacement property to begin claiming the income for 2022 I checked the box that this property was acquired by a tax exchange. There was a message that came up that stated to be sure to fill out the Like Kind Exchange to report the sale of our business property to determine the basis and enter it into the asset information. I had already reported 1031 Tax Exchange and the sale of business property last year. I entered the asset information using the information from the 2021 Form 8824, line 25. When Form 4562 was generated I checked and there is no prior depreciation shown and it lists a 27.5 year depreciation schedule. Since I used Turbo Tax in 2021 I assumed it would automatically generate the information needed to calculate the depreciation correctly on Form 4562. How can I fix this?
It may be correct.
There are two ways to handle depreciation after a 1031. Turbo Tax only handles one method well, 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. The new building could have a different depreciation schedule from the old property, 39 vs 27.5 years.
It sounds like you have adjusted the basis and begun a fresh depreciation.
If you are trying to use the 2 schedule method, you will have one depreciation for each property and the basis is not adjusted since you are still depreciating the first/ relinquished property.
It may be correct.
There are two ways to handle depreciation after a 1031. Turbo Tax only handles one method well, 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. The new building could have a different depreciation schedule from the old property, 39 vs 27.5 years.
It sounds like you have adjusted the basis and begun a fresh depreciation.
If you are trying to use the 2 schedule method, you will have one depreciation for each property and the basis is not adjusted since you are still depreciating the first/ relinquished property.