Looking for Clarification on Depreciation Schedule After 1031
Hello,
I hope this isn't a repost, but I was hoping to get clarification on the basis for depreciation when it comes to the replacement property on a 1031 exchange. Would I basically calculate the basis for depreciation the same way I normally would for any other purchase, except I would subtract the depreciation basis amount transferred over from the relinquished property? And when I come up with the amount to depreciate, I would then aggregate that amount with the carried over depreciation schedule of the relinquished property to get my total annual depreciation?
I think this question is best asked using a hypothetical scenario.
Relinquished property basis for depreciation when exchanged: 100,000 with 20 years left on amort schedule.
Acquired property purchased at 800,000 (Land 300,000, Improvements 200,000)
Would the basis for depreciation on the new property be as follows?:
800,000 x 200,000/500,000 - 100,000 = 220,000 (Amortized SL/MM for 27.5 years)
The amount above would be aggregated with the 100,000 (Amortized SL/MM for 20 years) to get your total depreciation expense for the year on this property.
Am I understanding the required calculation properly? Thanks!