How to properly record the new replacement property in 2022 tax return after a 1031 exchange has beed ALL done?

Forum|Forum|3 years ago
February 4, 2023
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I filled out the Form 8824 for like kind exchange in my tax return 2021.

This year I am about to start doing my tax return for 2022,

Questions: Do I simply delete the old rental property information in TurboTax

and enter my new rental property info. (OR)

do I just change the info. to the new address etc. (Override it so to speak)

Lastly, Do I need to file Form 8824 again for my tax return?

TurboTax Home & Biz Windows

AmyC

Employee

If you did the complete 1031 during 2021 and filed the 8824 with all information, you do not need to complete the 8824 again.

There are two ways to handle a 1031 exchange but Turbo Tax only handles one method. You will need to enter the new rental property and use your new basis, purchase + deferred gain. Be sure you have complete records of your old rental property in case of an audit someday. Then you can delete the old property.

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HIPA76TIAAuthor

Hello! Thank you for the reply it was helpful. I do have one last question:

Last year when I filled out my form 8824 line item#25 (Basis of like kind property received) = $170,424.

Therefore- is that the new basis number I should put to depreciate for the new replacement property be $170,424? Thank you so much!

DianeW777

The basic concept of a 1031 exchange is that the basis of your Old Property rolls over to your New Property. In other words, if you sold your Old Property for $100,000, and bought your New Property for the same, your basis on the New Property would be the same. It makes sense then that your depreciation schedule would be exactly the same, which it is! In other words, you continue your depreciation calculations as if you still own the Old Property (your acquisition date, cost, previous depreciation taken, and remaining un-depreciated basis remain the same).

If you "bought-up" in your exchange (your New Property cost more than you sold your Old for), the answer is easy – you treat the buy up part as you would a new addition to an existing property. In other words, you treat the amount of the buy-up the same as you would the cost of construction, for example, of a garage added to an existing house – the cost is the amount of the buy-up; the date you start depreciating it is the date you purchased the new property; and the depreciation method you use is the method most appropriate for that type of property in the year you bought the New Property (regardless of the method you used for the original house). If you think of it this way, then it's easy, even if your property is a large office building or a more complex purchase.

Only the 'buy up' is a new asset with a new beginning recovery period. Add the old property exactly as it is (or leave it and rename it), then add a new asset for the additional 'buy up' in the trade.

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