Residential rental house sold at $955K net. Under 1031 Ex, a house purchased at $950K with land $400K. Can I continue old depreciation @$10K for remaining 20.5 years?

Forum|Forum|2 years ago
January 17, 2024
1 reply
0 views

Accumulated 7 years depreciation of the house sold was $70,000, no new money invested to the replaced property.

TurboTax Online

Best answer by KrisD15

Yes

If you have a 205,000 adjusted basis from the exchange, that can continue to be depreciated over the remaining 20.5 years leaving a separate depreciable asset with a basis of 345,000 which is to be depreciated over 27.5 years if the replacement property has a value of 550,000 for the house.

As stated, you may also depreciated the full 550,000 (adjusted basis) over 27.5 years.

If the transaction resulted in 5,000 cash received, that would be considered "Boot" and therefore taxable income for the year of sale.

IRS Pub 544

ThomasM125

Yes, you can continue to depreciate the property exchanged over it's remaining useful life, using it's basis at time of the exchange. Any addition to basis because of the exchange will then be depreciated separately as though it was purchased new, so 27.5 years for a residential rental. You also have the option of depreciating the entire new adjusted basis over 27.5 years.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

7012simonAuthor

Thank you. The cost basis of the property sold at the time of the exchange was $600,000 purchasing price minus 325,000 land value minus $70,000 accumulated depreciation==$205,000, is it correct?