Foreclosure Cost Basis

[Frank S.]

Hi everyone, 

I have  a tax question. Any help is appreciated. 

Can I obtain a quote to build a property through a reliable general contractor to be used as my cost basis?  My intention is to maximize the depreciation, including itemized depreciation planning to sell in 5 years. Then, 1031 to avoid Uncle Sam's 25% recapture tax.

For instance, house bought at $70,000.  If the rule of thumb used

75% building  - 27.5 depreciation

25% land - no depreciation

This provides $1,900 in depreciation (only % of tax bracket is saved)

In contrast, if the contractor price is $120,000 for the building itself.  This provides a depreciation of $4,363 (only % of tax bracket is saved)

Is this acceptable?

Thanks, 

Frank