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Posted by Kirk Carpenter on March 10, 2007, 2:11 am
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How do you determine the basis for a property received in a
like-kind exchange?
Scenario: Residential rental townhome with basis of
50,000.00 placed in service in 1985 under ACRS/19 years.
Property has depreciated out. 2005 casualty loss of
43,000.00 due to Hurricane Wilma. Property exchanged for
another residential rental townhome in different state (FMV
106,000.00) in 2006. How would you go about calculating the
depreciable basis of the property received in the exchange?
Thanks, Kirk.
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Posted by L K Williams on March 11, 2007, 3:50 am
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> How do you determine the basis for a property received in a
> like-kind exchange?
>
> Scenario: Residential rental townhome with basis of
> 50,000.00 placed in service in 1985 under ACRS/19 years.
> Property has depreciated out. 2005 casualty loss of
> 43,000.00 due to Hurricane Wilma. Property exchanged for
> another residential rental townhome in different state (FMV
> 106,000.00) in 2006. How would you go about calculating the
> depreciable basis of the property received in the exchange?
Unless you paid "boot" to complete this transaction, you
don't seem to have a basis in the new property.
This is one of the disadvantages of 1031 exchanges. You
transfer the basis of the old property to the new one. Only
if you have to contribute more ("boot") to the transaction
do you get to increase the basis. Here, you old property
had been fully depreciated and your basis was $-0-.
Transfer this to the new property, and your basis is still
$-0-. FMV has no bearing on the allowable depreciation.
Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
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<< The foregoing was not intended or written to be used, >>
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<< Copyright (2006) - All rights reserved. >>
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Posted by Seth Breidbart on March 11, 2007, 12:23 pm
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> This is one of the disadvantages of 1031 exchanges. You
> transfer the basis of the old property to the new one. Only
> if you have to contribute more ("boot") to the transaction
> do you get to increase the basis. Here, you old property
> had been fully depreciated and your basis was $-0-.
The building was fully depreciated, but the land wasn't. So
there's basis in the new property. Is that considered all
in the land, or can some of it be depreciated (and if so,
how much)?
Seth
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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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Posted by Stuart A. Bronstein on March 12, 2007, 4:34 am
Please log in for more thread options sethb@panix.com (Seth Breidbart) wrote:
>> This is one of the disadvantages of 1031 exchanges. You
>> transfer the basis of the old property to the new one. Only
>> if you have to contribute more ("boot") to the transaction
>> do you get to increase the basis. Here, you old property
>> had been fully depreciated and your basis was $-0-.
> The building was fully depreciated, but the land wasn't. So
> there's basis in the new property. Is that considered all
> in the land, or can some of it be depreciated (and if so,
> how much)?
It's all in the land, and land has no depreciable basis.
There might be a different when trading a rental house for a
rental condo - is that considered like-kind?
If so, condominiums generally are considered to have little
or no non- depreciable land basis.
Stu
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by L K Williams on March 12, 2007, 8:34 pm
Please log in for more thread options sethb@panix.com (Seth Breidbart) wrote:
>> This is one of the disadvantages of 1031 exchanges. You
>> transfer the basis of the old property to the new one. Only
>> if you have to contribute more ("boot") to the transaction
>> do you get to increase the basis. Here, you old property
>> had been fully depreciated and your basis was $-0-.
> The building was fully depreciated, but the land wasn't. So
> there's basis in the new property. Is that considered all
> in the land, or can some of it be depreciated (and if so,
> how much)?
I'll admit I hadn't considered the land value -- a problem
that comes from shooting from the hip, so to speak.
However, this was an exchange of real property. Exchanges
of personal property, such as a business, are considered to
be a series of individual exchanges and you must look at the
composition of the exchange package. However, real estate
is not treated this way, i.e. you exchange one unit of real
property for another unit. I interpret this to mean that
the basis of all items in the exchange is taken as a whole
and must be apportioned to the newly acquired assets. I've
never seen this issue addressed and have always treated my
client's exchanges this way. So, you are right, there would
be some basis allocated to the new buildings, etc. and that
would be depreciated.
Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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