I acquired a single-family investment property about 5 years ago for a net acquisition cost of $100,000. Over the time I’ve owned the property, I’ve taken $15,000 in depreciation, which brings my adjusted cost basis down to $85,000. If I owned the first property for 5 years, this means the remaining $85,000 adjusted cost basis would need to continue to be depreciated for another 22.5 years. (Remember that the total depreciation timeframe is 27.5 years for residential investment properties). How do we reflect this in TT?
Well, I'll bet you can't use the online versions for this. You have to keep 2 schedules so that's going to require forms view. Maybe if you did the 1031 in TT with a download or CD version it would be easier.
Election Out Planning
Under Treas. Reg. § 1.168(i)-6(i)(1), a taxpayer may elect to opt out of the final regulations, which otherwise are mandatory for any MACRS property involved in a like-kind exchange or involuntary conversion. By electing not to use the two-basis approach of the regulations, the entire basis in the replacement property is deemed to have been placed in service at the time of replacement, while the adjusted depreciable basis of the relinquished property is treated as disposed. The election is made by a partnership, not the partners separately, and by an S corporation rather than its shareholders separately. A separate election is required for each like-kind exchange or involuntary conversion. Once made, the election may only be revoked with the consent of the IRS, and such consent will be granted only in extraordinary circumstances.
the only way to handle the two-asset approach in TurboTax is to leave the original property so that it can be depreciated over the remaining life. and then add the new additional basis as a separate asset so it can be depreciated over 27.5 years.
i think by default Turbotax uses the optional one asset method allowed by the regs.