For starters, I'm probably overthinking this...
I sold a duplex last year, performed a 1031 exchange, and purchase a fractional percentage ownership in a Delaware Statutory Trust (DST). All of my numbers seem to be correct so far on my schedule E and my Form 8824. Carryover basis and excess basis was calculated correctly.
The relinquished property (duplex) as of the date of sale has $94,733 section 1250 unrecaptured depreciation ($91,187 at the end of 2023 and another $3546 when sold on 9/23/2024).
I do not qualify as a real estate professional, nor am I allowed the $25000 deduction. So, the relinquished property has accumulated unallowed passive losses of $62,822.
I have read several other posts here, but I cannot find the answers I'm looking for...
I'll address the carryover depreciation first...
- I tried using FORMS and entering the information on the replacement (DST) Asset Entry Worksheet.
- When I enter $94,733 on line 10 and line 12, the values appear on the Depreciation report, but I get RED errors that "Prior Depreciation should be blank"
- When I go to the section, MACRS Property Involved in a Like-Kind Exchange or Involuntary Conversion, and enter $94733 on line 61d and 61e, nothing appears on the Depreciation Report. (However, the way this is worded, I believe these values should only be $3546 for the Depreciation in the year of disposition)
1) How do I "transfer" the depreciation to the new replacement property?
2) Do I just wait until next year and then add "Prior Year Depreciation" somehow?
3) Does the relinquished property information "magically" move to the replacement property next year?
Now, I'll address the Carryover Passive Activity Losses...
- I checked the box for "I have passive activity real estate losses carried over from a prior year" when I created the replacement property (DST)
- I entered $62822 for both "Regular Tax Carryovers and the AMT Carryovers
- However, these losses are also still on the Schedule E for the relinquished property, resulting in $62822 too much in passive losses
1) How do I "transfer" the carryover passive losses to the new replacement property?
2) Is there a way to "remove" the 2024 expenses from the relinquished (duplex) property so I can enter the carryover losses for the new replacement (DST) property?
Any help or discussion would be appreciated.
BTW, my account could not figure out how to do this in her Lacerte software last year either.
