But what happens to the unrecognized gain from the first sale.  Why is it not considered part of the sale of the 2nd piece of property.  The client actually had a gain on the first sale, but never paid taxes on it.     I thought this would be rolled into the $898,848.00.  

The original sale was for 2,228,152.  The basis at that time was $898,848.  Creating a realized gain of $ 1,329,304.  They only recognized $173,571 gain on the original sale, deferring $ 1,155,733 of a gain until a future date.     Does this 1st unrecognized gain (1,155,733) never get taxed?  only the gain from the 2nd sale?     

I thought the gain from the first would reduce the basis of $898,848.00 and that is how it was accounted for.  So, 898,848.00 - 1,155,733 = $-256,885.00.  If the replacement property was eventually sold for 2,000,000 the gain would be 2,256,885.00?   incorporating the gain from the first and second sale.  But from the replies I am getting, my calculations are not, correct?