How to allocate Depreciation Carryover in a 1031 Exchange from one investment property into two Delaware Statutory Trusts (DST)

[taxq7474]

Taxpayer conducted a 1031 Exchange and relinquished one property for interest in two Delaware Statutory Trusts (DST).  I've calculated the depreciation carryover from the relinquished property but unsure how to allocate or split the carry over depreciation into these two new investments.  They are a percentage of ownership and not a physical subject property.

1.  How would depreciation carry over be allocated

2. How do I set up the depreciation schedule in ProSeries without a subject property? 

[Skylane · Accepted solution]

1.  Since you're investing the proceeds of the 1031 in multiple DSTs, I'd split the carryover basis by % of investment.....

2.  Find out specifically what year end documentation you'll be receiving from the trustee(s). Get a sample if you can. 

3. Id file a separate Sch E for each DST using their year end statements, splitting and depreciating the carryover basis among the DST's 

DST 1031 exchange investors do not receive a K-1 or 1099 at the end of the year for tax purposes. At the end of the year you will receive an operating statement (sometimes referred to as a substitute 1099). This will show your pro-rata portion of the DST properties rental income and expenses.

[taxq7474]

Many thanks!