TP sold a 1031 exchange property. The exchange was done in 2016 and I looked at the details on F8824 for that year.

It appears that the accumulated depreciation on the relinquished property was not carried over to the replacement asset. All the instructions appear to have been followed in reported the exchange.

The FMV of property given up was $480K and the FMV of property received was $445K. Boot of $35K was reduced by selling costs of $30K resulting in a taxable gain of $5K.

The adjusted basis of the property given up was $246K and accumulated depreciation taken was $66K.

Deferred gain is $199K.

The asset entry for the replacement property reports the $246K adjusted basis and depreciation was calculated on this amount. The election to elect out of regs under Sec 1.168(i)-6(i) was not taken.

When the accumulated depreciation from the relinquished asset was entered on the replacement property Asset Entry Wks, an error message stated that no prior depreciation should be entered for the asset. Now this seems to come back to bite me when reporting the sale of the property.

$32K depreciation has been taken on the replacement asset since the 2016 exchange date. The gain from sale only reports $32K as 1250 recapture and ignores the $66K depreciation reported for the relinquished property. 

Shouldn't the 1250 recapture be $32K plus $66K for a total recapture amount of $98K?

How do I get PS to recognize the total amount of $98K 1250 recapture? 

For future 1031s, how can the prior depreciation on relinquished property be accounted for in PS so that it isn't dropped in calculating 1250 recapture?

Thank you.