I sold a rental property in 2023 which was purchased in 1984. I purchased a new property in 2023 through a 1031 Exchange. Is this transaction reported on Form 8824 or is it considered a business transaction and reported on Form 4797?
Also, the asset sold in 2023 was fully depreciated. Therefore, the capital gain deferred was a combination of depreciation take and capital for due to the sales price being significantly higher that the remaining cost basis in the original prices. I don't see how I can elect to depreciate any of the new basis in the new property purchased? How does the election determine the in service date?
Placed in service date (FROM TURBOTAX)
If I don't make the election, the placed in service date for each depreciation schedule also remains the same? If I make the election, the placed in service date resets to the date I acquired the replacement property?
The transaction is reported on Form 8824, not Form 4797 if it was a 1031 exchange.
I'll page @Mike9241 for how to deal with the property going forward. There are two ways to handle depreciation, but it appears as if the relinquished property was fully depreciated.
if the replacement property didn't cost more (and thus you didn't put cash/mortgage into the exchange to acquire property costing more than the sales price), then your basis for depreciating the replacement property would be zero
In short, the cost of the replacement property is reduced by the deferred gain for purposes of computing depreciation.