Basis of New Property in 1031 Exchange

Forum|Forum|2 months ago
May 8, 2026
1 reply
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I purchased a residential rental property in 1981 for $72,000 and took depreciation. In 2004 I sold the property for $172,000 and purchased another residential for $172,000 within 45 days of the sale of the old property. The basis of the old property was $23,000. How do I calculate the basis of the new property? I know the $23,000 carries forward. Since the selling price of the old property was $172,000 and the purchase price of the new property was $172,000, is there zero "buy-up" to increase the basis? Or does the difference between new property purchase price and the old basis represent "buy-up" ($172,000-$23,000=$149,000 buy up) providing a new basis of $172,000 ($23,000 old basis plus $149,000 new basis)? Using desk top TurboTax for Form 8824 it says my new basis is $23,000 but other TurboTax discussions say the new price represents a $149,000 buy-up in basis.

Hi Palms

Level 7

Your basis in the repalcement property is $23,000 and you have deferred gain of $149,000.

Bilshaw1Author

Level 2

Maybe I'm getting confused but I just read some information about the 'January 2000 IRS Notice 2000-4' and it talks about the residual basis on the old property being called 'the exchange basis' and the difference of the new property basis minus the old basis as being called 'the excess basis'. It says the exchange basis should continue to be depreciated under the original depreciation schedule and the excess basis would be depreciated under a new schedule, although there may be an option to combine the under the new schedule. I'm not a tax person so this is making my head hurt.

Hi Palms

Level 7

You would have that "extra asset" to depreciate IF you paid MORE for the replacement property than the FMV of the relinquished property. As it is, your basis for future depreication is $23,000.