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Subject Author Date
Help - rental real estate depreciation is driving me nuts! DenverAnon 04-08-2008
Posted by Bill Brown on April 9, 2008, 3:48 pm
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>
> Based on the set of information he provided, and the fact that he had used a
> professional tax preparer during the period of the 1031 activity.
>

I misread the year in which the exchange took place.


> And based on the fact I have seen rants from people who seem to get off when
> someone says they "sold" a property and did a "1031 exchange".
>
Too many people do not understand that 1031 treatment is not available
if they had control of the sales proceeds of the first property. They
often describe what they did as selling the first property and doing a
1031 exchange when, in fact, they are not eligible for 1031 treatment.
Therefore, whenever someone says something like, "I sold it for a
profit and exchanged it (1031 exchange)" I, and many others, want
confirming information that a valid 1031 exchange actually took
place.

You may not appreciate the focus on technical jargon but misuse of
language is a large source of miscommunication problems.
Unfortunately, misreading clearly written statements is also a source
of miscommunication problems and I have been guilty of that infraction
twice this week (that I know about).

> move on to his real question, or allow others to do so.

The most likely explanation is that he made a data entry error. The
next most likely explanation is that he did not provide all the
relevant facts in his post.

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Posted by Gil Faver on April 9, 2008, 5:44 pm
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>>
> Too many people do not understand that 1031 treatment is not available
> if they had control of the sales proceeds of the first property. They
> often describe what they did as selling the first property and doing a
> 1031 exchange when, in fact, they are not eligible for 1031 treatment.
> Therefore, whenever someone says something like, "I sold it for a
> profit and exchanged it (1031 exchange)" I, and many others, want
> confirming information that a valid 1031 exchange actually took
> place.
>
> You may not appreciate the focus on technical jargon but misuse of
> language is a large source of miscommunication problems.

I know technical jargon all too well. I also know that when someone says he
"sold" property, they may not be saying "I sold property and took control of
the proceeds and thus did not qualify for 1031 treatment". So while raising
the point is fine, going off on a diatribe (not you, others in the past)
serves no purpose. Raising the point and then not addressing the issue in
the likely event that the OP simply did not get the technical jargon
perfectly correct also does not help the OP with his question, or others
reading the thread now or in the future.

I have seen threads in the past where the OP is frustrated because the
thread degenerated into a literary discussion, rather than stating the 1031
requirements and then addressing the issue. I cringe at the though of such
threads recurring.

sorry. I'm done.

========================================= MODERATOR'S COMMENT:
- agreed, may be time to consider this thread closed

--
<< ------------------------------------------------------- >>
<< 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. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by Paul Thomas, CPA on April 8, 2008, 4:04 pm
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> I am trying to do my own taxes this year, after having a tax services
> firm do it for me for almost 10 years. I am badly stuck at Schedule E,
> line 20 Depreciation Expense. It looks like my situation is somewhat
> complicated than most rental real estate.
>
> In summary, I purchased my primary residence in 1991 and converted it
> to 100% rental in1998. I sold it for a profit and exchanged it (1031
> exchange) for another 100% rental in 2004.
>
> I am somewhat daunted at the size of the IRS Publication 946 on
> depreciating real assets. I am hoping someone familiar with my
> situation can help me out. The tax software I am using is giving a
> number that is different from what it was in the previous years.
>
> My question simply is what is the depreciation this year?





The short answer is that it's exactly the same as last year.

But you need to know the long answer, which will depend on so many factors
that can't be covered here.





--
Paul A. Thomas, CPA
Athens, Georgia

--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Mike20878 on April 8, 2008, 11:17 pm
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> Hi,
>
> I am trying to do my own taxes this year, after having a tax services
> firm do it for me for almost 10 years. I am badly stuck at Schedule E,
> line 20 Depreciation Expense. It looks like my situation is somewhat
> complicated than most rental real estate.
>
> In summary, I purchased my primary residence in 1991 and converted it
> to 100% rental in1998. I sold it for a profit and exchanged it (1031
> exchange) for another 100% rental in 2004.
>
> I am somewhat daunted at the size of the IRS Publication 946 on
> depreciating real assets. I am hoping someone familiar with my
> situation can help me out. The tax software I am using is giving a
> number that is different from what it was in the previous years.
>
> My question simply is what is the depreciation this year?
>
> Thanks in advance,
> RT
>
> The details:
> ----------------------------
> Purchased primary residence 04/1991
>   purchase price $100K
>   put down $20K
>   loan of $80K
>
> Converted to rental Jan 1998
>   rental income of $12K
>   lost money every year due to depreciation+expenses
>
> Sold in April 2004, sold for $215K
>  paid 15K in commissions
>  recovered $200K
>  paid back 50K of existing loan
>
> Used proceeds ($150K) + took a loan of $100K
>   did a 1031 exchange to purchase another
>   residential rental for $250K
>
> 1998-2003 return on line 20, Schedule E
>   Depreciation Expense $3K
>
> 2004-2006 return on line 20, Schedule E
>   Depreciation Expense $4K
>

Do you have the depreciation schedule the tax service prepared last
year? It should have the basis they were depreciating along with the
ending accumulated depreciation.

1031 exchanges are complicated in their calculation of basis so I
would go with the basis reported in the prior year if you can get it.
They should provide you with the depreciation schedule.

With that, you should be depreciating residential rental property over
27.5 years.

It can be complicated because technically in an exchange you are
supposed to depreciate the assets in layers. You calculate basis in
the new asset by using book value of the old at date of exchange. You
continue to depreciate the old asset on the books and depreciate the
new layer from date of exchange. For that reason, I repeat that you
go back to your old preparer and get the asset listing.

--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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