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JudieLD
Level 1

Land not deducted

I did a like-kind exchange of rental properties in 2003.  The Form 8824 prepared by a tax preparer reported the basis as 142,724, the cost basis of the 2 properties, which I used for depreciation.  That amount plus the deferred gain on the property sold equals the purchase price.  I'm thinking I should have taken a percentage of that new cost basis off for the land?  But, I didn't.  I sold it in 2019 and don't know what to report for the cost of the land?  I'm using property tax valuation for percent of land in the selling price.

Cost to buy in 2003: 219,800

Deferred gain - 77486

=  142,314

basis of property given up 38724

basis of property received 103,590

= 142,314 Adjusted cost basis which I used for depreciation

How do I report amount of land in the cost?

Thank you!

Judie

5 Replies
jobu1669
Level 2

Land not deducted

But if you didn't take a percentage off your new cost basis for land it's too late now that you've been taking depreciation deductions on that entire cost basis for all of these years. Don't enter anything for land.

Carl
Level 15

Land not deducted

I sold it in 2019 and don't know what to report for the cost of the land?

Assuming you sold at a gain, any amount over the cost basis of the land (which I assume is zero) will be fine. Since you did not properly allocate 17 years ago, it's to late now. You simply have to recapture all prior depreciation and pay taxes on it in the tax year of the sale. You will be taxed on that recaptured depreciation up to a maximum of 25%.

I don't know what kind of issues this will cause for you with the IRS down the road 24-36 months after you file reporting the sale,  if your overall AGI puts you in any tax bracket above the 24% bracket. So professional help may be something you want to seriously consider; especially if your state taxes personal income.

JudieLD
Level 1

Land not deducted

Thank you!

JudieLD
Level 1

Land not deducted

Thank you.  Yes, I know it's too late to 'redo' but my question was what to enter for land - guess the answer is zero.

jobu1669
Level 2

Land not deducted

Yeah, the answer is zero

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