Here is the quickest way I can explain it.

I checked the instructions for Form 4797 or Form 1040 Schedule D, and neither explain how to indicate that the gain is deferred and not taxable right now.So either: 1) Form 4797 is irrelevant to my exchange and I don't need to file it at all, or 2) I am missing something. 

Quote from @Jared Rollins: I was hoping someone had a street-by-street map to stick to of Detroit and also could explain to me how to assess the future taxes on rental properties.

I would contact them ahead of time and explain the situation so that they aren't scared by the change.

I didn't end up buying it but called the buyer's agent who sold it and explained it to him so his buyers would think he was a savant!

Include a short, clear note explaining that payments are still being sent to the prior owner despite submission months ago.

Whoops, just noticed Adrienne already explained that.But I tend to agree with @Jason Wray about the plain overall facelift.

Am I comfortable explaining this with a straight face in court?

Quote from @William Thompson: One thing I see every tax season is investors depreciating their rental property incorrectly — not because they’re careless, but because no one ever explained what actually gets capitalized.Here’s the simple rule of thumb:Your starting point should always be your HUD-1 / Closing Disclosure.Typically capitalized:Purchase price (excluding land)Facilitative acquisition costs tied to the purchaseTypically not capitalized:Loan costsOperating expensesEscrow items (taxes, insurance, prepaid interest)When everything gets lumped together, depreciation gets distorted — and that can lead to problems later, especially if you refinance, sell, or do cost segregation.Getting the capitalization right from day one makes everything else cleaner:depreciation, tax planning, and future exits.If you want a second set of eyes, DM me “HUD-1” and I’ll help make sure your property is properly capitalized.Curious — did you ever review how your rental was originally capitalized, or did you assume it was done correctly? 

Can you explain to me what your reserve requirements are?