1031 Exchange...I have to create a new Asset Entry Wks for the new property. And it has to start depreciating for the remainder of 27.5 years and has to carry forward

[chapguy19]

all the Acc. Dep. from the initial property.
I can't enter the AccDep in the new Asset Wks since PS won't allow AccDep for a property "acquired" this year.  
Also, the depreciation length has to be lowered to 18.5 years because  the exchanged property already had 9 years of dep.
I don't see where I can accomplish either of my requirments.  
Thanks in advance, C

[TaxGuyBill · Accepted solution]

I think you could be misunderstanding how it works.

Option #1 (the default rule), part 1:  Continue reporting the old asset, using the original place in service date (so it depreciates for 18.5 more years)

Option #1 (the default rule), part 2:  Any excess/additional Basis, start depreciating using the new "placed in service" date.

Option #2:  Depreciate the entire Basis (both Adjusted old and new) using the current "placed in service" date.  Manually keep track of prior depreciation for whenever it sells.  Be sure to check to box on the Asset Entry Worksheet to elect out of §1.168(i) rules.

[chapguy19]

Thank you for your quick response.

First, this issue is more complicated because the 1031 exchange involves one property being relinquished for two replacement properties. The two new properties are $600,000 more in value, so I have both an exchange basis and an excess basis.

I understand that the excess basis has a new separate 27.5-year depreciation schedule.

Can I check "Yes" to elect out of the 1.168 rule which would allow me to treat the excess and exchange basis as the same 27.5.

Doesn't Notice 2000-4 allow this? 

I very much appreciate your patience. 

Thanks, Christopher

[qbteachmt]

@chapguy19 

I see three topics running on what appears to be the same issue. In addition to this one, you have:

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/1031-one-property-for-...

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/1031-exchange-with-one...

If you keep it to one topic, everyone trying to help will be able to see all questions and replies so far, and that reduces the redundancy, saves you time, and saves time for the peers users who volunteer to try and help here. Thanks.

[TaxGuyBill]

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@chapguy19 wrote:

Can I check "Yes" to elect out of the 1.168 rule which would allow me to treat the excess and exchange basis as the same 27.5.

Doesn't Notice 2000-4 allow this? 

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Yes, but that will reduce the amount of depreciation for each of the first 18 years.  Is that what the taxpayer wants?  That usually isn't in the best interest of the taxpayer.

I think Notice 2000-4 came up with the idea, but the Regulation is what now allows it.

[chapguy19]

I will create a new Asset Entry WKS for the new property that has the excess basis over the 27.5 years of new residential rental property.

I will continue to depreciate the original property, even though it is no longer owned.

Question...where so I place the original Asset Entry WKS in ProSeries?  Do I just leave it where it is currently organized and show no activity for that property.  Won't it stop depreciating if I indicate that there is a Date of Disposition?  Didn't I read somewhere that I have to have to have a Date of Disposition to indicate that it was sold?

Thanks for your help, Christopher

[TaxGuyBill]

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@chapguy19 wrote:

Question...where so I place the original Asset Entry WKS in ProSeries?

Didn't I read somewhere that I have to have to have a Date of Disposition to indicate that it was sold?

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Assign it to the new property.  Go to the very top menu and click "Forms", then "Change Activity".

Not when you are continuing to depreciate it after a 1031 Exchange.  Just continue depreciating it.