1031 exchange of rental real estate. Should I use the basis of all depreciated assets?

[Golfer2016]

Client did a 1031 of their rental real estate.  For the basis, should I include the adjusted basis of everything they've depreciated?  Or, just of the structure?  Also, how do I find the adjusted basis?  I assume for each asset, i need to denote that it was disposed.  

[TaxMonkey · Accepted solution]

1245 assets are not like kind with 1250 assets, and only 1250 assets are eligible for IRC 1031.

[Golfer2016]

So would you just not include that on the 1031? To figure out the  adjustable basis I used the prior depreciation and added the depreciation for the current year.  

[Golfer2016]

For exampple, I am guessing furniture will have to be recaptured?  How about furnace?

[TaxMonkey]

I would allocate a portion of the gross proceeds = adjusted basis for all 1245 assets - so no gain or loss.  Then transfer the basis in 1250 assets, and determine the deferred gain.

[Golfer2016]

SO you are not doing a 1031 on 1250 assets? The only depreciated thing is furniture, which is fully depreciated.  I could just list it being sold at $0?

[Golfer2016]

So if you are doing 1031 exchange, you could only do like for like if they were buying new furniture.  

[TaxMonkey]

Only real property qualifies for 1031 now.  I would simply abandon any fully depreciated 1245 assets.

[Golfer2016]

How do you abandon? Just put sales value at 0 and say fully taxable disposition?

[TaxMonkey]

yes

[Golfer2016]

On the 1031 entry if asks for adjusted basis. I just put the amount that was prior depreciated and added the current year depreciation. Do you think that’s right?

[Golfer2016]

Taxmonkey, what do you think?  The instructions for 1031 (https://accountants-community.intuit.com/articles/1608733-1040-completing-a-like-kind-exchange-of-bu...) indicate that you would use the excess basis from Line F of the Replacement Property Depreciable Basis Components Smart Worksheet and enter it as the cost basis for the new asset.  However, what would I put for land value on the new asset?  Or, do I keep it blank because it's already included?

[Golfer2016]

Taxmonkey, was I correct in adjusted basis?