Real Estate Agent · Fort Collins, CO · Member since 2014 · 94 posts · 78 votes
Can anyone tell me if carryover basis restarts at 27.5 years in a 1031x, or is it excess basis at 27.5 and carryover picking up where it left off? Having trouble finding the answer. Any help is very much appreciated!
You have two options after a 1031 exchange. You'll want to work with your accountant on this.
Option 1: Separate Schedules
Carryover: Continue depreciating the remaining cost basis from the relinquished property over its original depreciation schedule (e.g., 17.5 years remaining for residential property). New Schedule: Simultaneously, start a new depreciation schedule for the additional cost basis attributed to the replacement property, following standard timeframes (27.5 years for residential, 39 years for commercial).
Option 2: Treat as New Asset
Combined Basis: Treat the entire cost basis of the replacement property (carried-over basis + additional funds invested) as if it were a newly acquired asset. Single Schedule: Depreciate the total cost basis over the standard timeframe for the replacement property type (27.5 years for residential or 39 years for commercial).
If you choose option #2, you need to file an additional form (4652) with your tax return.
You have two options after a 1031 exchange. You'll want to work with your accountant on this.
Option 1: Separate Schedules
Carryover: Continue depreciating the remaining cost basis from the relinquished property over its original depreciation schedule (e.g., 17.5 years remaining for residential property). New Schedule: Simultaneously, start a new depreciation schedule for the additional cost basis attributed to the replacement property, following standard timeframes (27.5 years for residential, 39 years for commercial).
Option 2: Treat as New Asset
Combined Basis: Treat the entire cost basis of the replacement property (carried-over basis + additional funds invested) as if it were a newly acquired asset. Single Schedule: Depreciate the total cost basis over the standard timeframe for the replacement property type (27.5 years for residential or 39 years for commercial).
If you choose option #2, you need to file an additional form (4652) with your tax return.