How to move carryover loss from old property to new property after 1031 exchange?

Forum|Forum|6 years ago
January 24, 2020
1 reply
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In 2018 I exchanged a property for another property thru 1031 exchange.

This year, the old property's unallowed loss is listed separately from the new property.

First question: Do I need to add this loss to the new property and get rid of the other property in the tax forms, or do I leave it the way it is and TurboTax will continue to use (accumulate) the losses in the future?

Second question: If I do add it to the new property, where do I do that?

Thanks for your help.

AmyC

Employee

The 1031 exchange allows you to completely close out the property you sold. Everything from the sold property will move into the new property.

The IRS says:

How do you compute the basis in the new property?

It is critical that you and your tax representative adjust and track basis correctly to comply with Section 1031 regulations.

Gain is deferred, but not forgiven, in a like-kind exchange. You must calculate and keep track of your basis in the new property you acquired in the exchange.

The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition. A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction.

When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

For complete 1031 information, please see this link.

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