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FMV vs Basis for rental property received in like kind exchange

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Level 1

client received rental property in like kind exchange and I am setting up the depreciation. There is a FMV of $759,000 and a Basis of $219,232 with a deferred gain of $539,768

what do I use for the cost? And what do I do about the deferred gain? There is also land value that I will need to make an adjustment for as well.

Any help is greatly appreciated

Pattie Clary

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Level 15

Basis of new property = adjusted basis of old property plus any additional amounts paid to acquire it.


ex-AllStar

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Level 15

Basis of new property = adjusted basis of old property plus any additional amounts paid to acquire it.


ex-AllStar

View solution in original post

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Level 12

If I remember correctly, the 'default' way is to depreciate the newly acquired Basis (the additional amount paid for the new property) AND continue depreciating the old property (the Basis which is transferring to the new property).

You can make an election to start the entire depreciation anew using the new Basis (see Susan's comment above), but the probably results in lower depreciation.

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Level 1

Thanks for the reply! What about the deferred gain? What happens to that amount?

 

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Level 15

It's deferred until the property is sold. Deferring was the point of the like kind exchange.


ex-AllStar
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