topic what is relinquished property equity on a 1031 exchange in Investing

what is relinquished property equity on a 1031 exchange

mbardshore — Tue, 15 Sep 2020 01:32:31 GMT

30 years ago I bought a rental propety

20 years I did a qualified 1031 exchange

Now I am selling the 2nd building

On my exchange agreement from 20 years ago there is a $ amount called "Relinquished Property Equity"

Is this amount the basis that I should use going into the calculation for the 2nd building?

I assume that I subtract the depreciation on the first building from this relinquished property amount / basis before calculating building 2?

Re: what is relinquished property equity on a 1031 exchange

mellish7777 — Tue, 15 Sep 2020 02:11:23 GMT

The equity is the value or cost minus debt if there is any....you need to ask your facilitator what that term designates because it could be anything and you should use a tax pro for this or the chances of getting this right without help are slim to none.

Re: what is relinquished property equity on a 1031 exchange

mbardshore — Tue, 15 Sep 2020 03:46:20 GMT

i know what equity means

I'm asking about the 1031 exchange agreement that was created when I rolled over the equity from one property to the next

Re: what is relinquished property equity on a 1031 exchange

Anonymous — Tue, 15 Sep 2020 05:22:32 GMT

We can't see the agreement and even if we did we can't be sure what the terminology means. why do you need to know?

reg 1.1031(k)-1(a)

For purposes of section 1031 and this section, a deferred exchange is defined as an exchange in which, pursuant to an agreement, the taxpayer transfers property held for productive use in a trade or business or for investment (the “relinquished property”)

so as a guess I would say it's the sales price of the relinquished property less any mortgages or debts thereon.

Re: what is relinquished property equity on a 1031 exchange

mbardshore — Tue, 15 Sep 2020 11:37:11 GMT

the issue is that I am selling the second building . I did not pay capital gains 20 years ago when I bought the first building because of the 1031 exchange but now I must pay capital gains., so I need to know what my basis was when I sold the first building. Yes, the dollar amount on the document called relinquished property equity is sale price minus mortgage minus other sales costs. From what I read online, basis is calculated as purchase price minus accumulated depreciation. But I also read online the basis should have been given to me at the time of the exchange and this relinquished equity figure is the only amount I find. So I'm thinking maybe basis is recalculated when the 1st property is sold but I assume I still need to subtract depreciation

Re: what is relinquished property equity on a 1031 exchange

mellish7777 — Tue, 15 Sep 2020 14:42:06 GMT

You need a tax pro if you haven't been tracking your basis since the exchange.

depreciation-after-1031-exchange

Re: what is relinquished property equity on a 1031 exchange

mbardshore — Tue, 15 Sep 2020 20:07:05 GMT

i appreciate people trying to help but if you don't understand the question it does help for you to answer

It's not a question of not tracking my basis . The things that change my basis are capital improvements and the sale which am doing right now. This dollar amount called relinquished property equity was given at the time of the exchange. Is this what the IRS thinks was the basis at the time of the exchange? I know how to calculate basis since then

Re: what is relinquished property equity on a 1031 exchange

Anonymous — Tue, 15 Sep 2020 20:59:24 GMT

if you reported the exchange correctly, the starting basis of the replacement property is reflected on the 8824 and is what you should have been using for depreciation purposes since the exchange (of course less the allocation to land). To that would be added subsequent additions and improvements that were capitalized. so you already have the original basis which is what you are seeking. we don't know what was included in what you refer to as relinquished property equity but It is probably not the amount you should have used for basis.

"Is this what the IRS thinks was the basis at the time of the exchange?" I would say not. This is not standard terminology and is reflected nowhere on the 8824. Search the web and see if you can find a definition. I could not. Maybe ask a lawyer.

Re: what is relinquished property equity on a 1031 exchange

mellish7777 — Tue, 15 Sep 2020 21:32:18 GMT

@mbardshore The problem is you don't know what you're doing but you're trying to do it anyway and trying to get assistance from people who can't see any of your documentation on a 100% anonymous internet tax forum. YOU NEED A TAX PRO!

Re: what is relinquished property equity on a 1031 exchange

mbardshore — Wed, 16 Sep 2020 06:07:17 GMT

aha! this 8824 was filed with my tax return 20 years when I sold the first building.Okay got it. It makes sense Thanks