Please explain the basis for 'Excess Basis Amount' requested on the "Tell Us More About This Rental Asset' screen.

[ColeenD3]

This would come into play if the replacement property cost more than relinquished property in a Like-kind exchange.

[Carl]

This comes into play in a 1031 exchange. If the replacement property you received costs more than the property you relinquished in the trade, then your excess basis would be the difference.

[dqh]

I still don't understand how to calculate the excess basis amount.

Say I sold Property A for 200k, with 10k closing cost, and 90k mortgage to pay off. So I'm left with 100k which I used to purchase 2 like-kind properties one (Property B) for 150k and another (Property C) for 200k. Of the 100k left from selling Property A, 50k is allocated to purchase property B, and 50k is located to purchase property C.  Property C and Property D each had a closing cost of 10k. 

Does that mean my Excess Basis Amount for 

Property B = 150k - 50k - 10k = 90k

Property C = 200k - 50k - 10k - 140k? 

[Critter-3]

You are posting from TurboTax Live.  You can arrange for the Live help you are paying the extra fee for with your questions …

https://ttlc.intuit.com/questions/4124827-how-do-i-connect-with-a-tax-expert-in-turbotax-live

[k2more]

I'm trying to switch from my CPA back to TT. I went to the CPA because we did a 1031 exchange a couple years ago. I assume to get my tax records straight in TT I'll need to enter the Excess basis amount. Like the original poster, I sold one property in exchange for two others. Can you provide help on how to enter this?

Thanks!

[destinhome]

Turbo tax

I too struggled to find an explanation for Excess Cost Basis. However, after reviewing several expert sites, there were the best explanations I could find:

https://www.google.com/amp/s/www.fool.com/millionacres/amp/taxes/1031-exchanges/1031-exchange-calcul...

https://tax-lawyer-texas.com/2018/05/28/calculation-of-basis-in-new-property-in-a-section-1031-like-...

Hope these help. 

[laa5679]

Can someone please confirm my understanding of Excess Basis of Replacement Property that Turbo Tax is asking for?

Excess Basis = Cost of Replacement Property  - Adjusted basis of Relinquished Property

Cost of Replacement Property = proceeds from sale relinquished property  used to purchase replacement property + any additional cash towards purchase of Replacement property + mortgage on Replacement Property

Thank you!

[laa5679]

Here is the clearest explanation I found on Excess Basis

http://www.1031.us/PDF/Depreciationof1031.pdf

[AmyC]

Cost basis of the new property = cost of new property - deferred gain from original property.

For example:

• Buy building A, original cost $250,000 ,depreciated $150,000, sold $400,000
• if sold,  A would have gain of $300,000 but instead did a 1031 exchange.
• Buy building B for $500,000.
• Cost basis for new property B is $500,000 -  prop A gain $300,000 = $200,000

The adjusted basis of building A is the exchange basis.

Excess basis = cost basis for new property  - adjusted basis of building A

For example:

• Building A   adjusted basis is $250,000 -dep $150,000 = $100,000 = exchange basis
• Building B $500,000 purchase price
• Excess basis = purchase -exchange
• Excess = $500,000 - $100,000 = $400,000 excess basis

[laa5679]

Thank you!

If I exchanged Building B, how do I calculated Building B's Adjusted Basis? Do I use its $500,000 purchase price or the $100,000 exchange basis from Building A?

[AmyC]

The adjusted cost basis is the purchase price minus the deferred gain from the property sold. 

From my example above:

Cost basis for new property B is $500,000 -  prop A gain $300,000 = $200,000

1031 Exchange - Internal Revenue Service

[laa5679]

What does Turbo Tax do with the Excess Basis it's asking for?

I looked at my depreciation schedule and Excess Basis is not listed.

I inputted the adjusted basis of property received (line 25 form 8824) as the cost of the property received. Turbo Tax, subtracted land value and depreciated starting year1 over 27.5 years!

Shouldn't the line 25 form 8824 be depreciated 27.5 years minus years of prior depreciation of property given up? If so, how do I make Trubo tax do this?

Thank you.

And the Excess Basis - spent huge amount of time figuring this out because Turbo tax asked for it, and it does not seem useful?!

[adn1107]

I used this: http://www.1031.us/PDF/Depreciationof1031.pdf

Elect-out of Using New Rules. The new regulation does permit the taxpayer to elect-out of the
rules and to treat the entire replacement property as a new asset. To make the election to not
use the new rules, see the instructions for IRS Form 4562, Depreciation and Amortization at
www.irs.gov. The election is made on IRS Form 4562 with your on-time tax return for the year
the replacement property is received. Also, the 2004 regulations do not address how the
depreciation rules work with exchanges of multiple replacement properties. The simplest
approach would be to elect out of using the new rules and depreciate each property using a
new depreciation schedule. The starting basis for the individual multiple replacement
properties is the ratio of its value to the total value of all the replacement properties multiplied
against the total new basis for all the replacement properties as reported on Form 8824.