topic How to handle unused depreciation on improvement when selling rental property in 1031 exchange? in Investors & landlords

How to handle unused depreciation on improvement when selling rental property in 1031 exchange?

hooly — Mon, 06 Jul 2020 12:20:04 GMT

I did a 1031 exchange when i sold a rental house. New windows were installed 10 years previously. How is the unused depreciation handled? The house was already fully depreciated.

Re: How to handle unused depreciation on improvement when selling rental property in 1031 exchange?

Anonymous_ — Mon, 06 Jul 2020 14:04:02 GMT

@hooly wrote:

How is the unused depreciation handled?

Depreciation deductions are deferred and the remaining basis can be essentially transferred to the replacement property. Alternatively, the asset can continue to be depreciated separately.

Re: How to handle unused depreciation on improvement when selling rental property in 1031 exchange?

hooly — Mon, 06 Jul 2020 15:19:58 GMT

When I say: sold or disposed of this item...it then asked me what i received for it. I put -0-. Then it shows a loss of the remaining amount of the item. Should I put the amount here that is the remaining portion that is not depreciated?

I was going to to move it to the new property to continue to depreciate there.

Re: How to handle unused depreciation on improvement when selling rental property in 1031 exchange?

Anonymous_ — Mon, 06 Jul 2020 16:16:54 GMT

How did you handle the exchange in general?

Are you using separate depreciation schedules for the replacement property or are you treating the replacement property as a new asset for that purpose (see link below for an explanation in plain English).

https://www.fool.com/millionacres/taxes/depreciation/depreciation-after-1031-exchange-how-it-works/

You should treat the improvement consistent with your overall approach.