2019/18 1031 vs. Hyper Depreciation

7 Replies

I'm currently selling a property where the cost segregated is $30M. I'm selling the property at auction and expect it to trade less than that price. 

I was speaking with a broker about a possible new bill that was introduced via Trump that was put into place to protect the 1031 (when there was talks about axing it). I am looking for the name of this bill to learn more. 

Hyper depreciation? 20% Super Depreciation?

If my property sells at $10M and the cost seg study shows $30M in assets.... Higher than the actual purchase price. Can this be hyper depreciated within the first year under this new bill? 

Originally posted by @Philip Dobson :

I'm currently selling a property where the cost segregated is $30M. I'm selling the property at auction and expect it to trade less than that price. 

I was speaking with a broker about a possible new bill that was introduced via Trump that was put into place to protect the 1031 (when there was talks about axing it). I am looking for the name of this bill to learn more. 

Hyper depreciation? 20% Super Depreciation?

If my property sells at $10M and the cost seg study shows $30M in assets.... Higher than the actual purchase price. Can this be hyper depreciated within the first year under this new bill? 

100 % bonus depreciation. 

No you cannot depreciate property more than purchased price. The purchase price will be allocated to the segregated asset. 

@Philip Dobson

I'm not sure you found the real answer to your question or what question you even asked. :)

  • 1031 is designed to protect you from capital gain tax, and I don't know if you even have capital gain.
  • Depreciation is what you do while you hold the property, not after you sell, so I'm confused as to why you mention depreciation AND trying to sell it.
  • 1031 can only apply to NON-segregated real property, i.e. what is left after cost segregation stripped out other property.
  • there are many other issues potentially to discuss here

Starting point: when did you buy the property and for how much? Who did the cost segregation and when?

Your cost segregation study would show 30m in asset, if that's what you paid for the property. It is possible that once you have depreciated all of your 5/7/15 property or at least a % of it that the remaining 1250 property would be under the selling price. This could trigger a capital gain. Only then would you worry about a 1031 exchange. But you'd have to take a look at your whole picture. There are a lot of variables left off for anyone to give you good advice. Like, why are you selling it at auction for such a big loss? When did you buy it? How much depreciation have you already taken? And many more.

If you need a good CPA, I can refer someone in Salt Lake that is well versed in this arena. Good luck.