I sold a commercial property in 2016 and did a like-kind exchange for a rental house. I thought the basis of the old property would be the basis of the new property, but TurboTax shows the new property with a much higher basis. Am I misunderstanding property basis after a 1031 exchange? The old property shows depreciable basis of approx 57k. TurboTax set the new property basis at approx 225k. No profit was made in the sale of the old property, in fact I had to contribute about 30k in cash to the new property. Please help, as I may have to amend my return but I thought Turbo Tax was doing all the basis figuring for me.
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for a 1031 exchange the basis in the replacement property is the value of the replacement property less the amount of gain deferred in the exchange (or plus the amount of unrecognized loss). In your example, you would have 57,000 then add the 30,000 cash you gave up. Did you assume any liabilities? If you did, that would increase your basis in the new property.
Here is an example:
Taxpayer exchanges a relinquished property with a value of $1,000,000, mortgage of $500,000 and a basis of $500,000 for a replacement property with a value of $1,500,000, a mortgage of $900,000 and the taxpayer adds cash of $100,000. The basis is computed as follows:
for a 1031 exchange the basis in the replacement property is the value of the replacement property less the amount of gain deferred in the exchange (or plus the amount of unrecognized loss). In your example, you would have 57,000 then add the 30,000 cash you gave up. Did you assume any liabilities? If you did, that would increase your basis in the new property.
Here is an example:
Taxpayer exchanges a relinquished property with a value of $1,000,000, mortgage of $500,000 and a basis of $500,000 for a replacement property with a value of $1,500,000, a mortgage of $900,000 and the taxpayer adds cash of $100,000. The basis is computed as follows:
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