Discussion:1031 Exchange - Two different years.
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Discussion Forum Index --> Consumer Questions --> 1031 Exchange - Two different years.
| 31 August 2006 | |
| We sold a piece of property toward the end of 2005 and the procceds were held in escrow for a 1031 exchange. We designated a replacement property within 45 days and closed on it within the prescribed 180 days. However, the closing took place in 2006.
My question is how do I handle this on the 1065? We have gotten our extension, but am not sure if I show the building as gone in 2005 and show the proceeds held by the escrow agent as an asset and then in 2006, show the exchanged property coming in? Would I then end depreciation on the day the property was sold and start in the new year on the day the exchanged came in? Also, how is the land portion handled, as both the sold and bought properties were a building on a piece of land. Thank you. | |
| 31 August 2006 | |
| You need to file form 8824 for 2005, and yes, show the relinquished building as being transferred. You will take depreciation on the relinquished property up until the day of disposition. No depreciation can be taken during the "gap" between relinquishment and replacement. And yes, you should book the proceeds as held by the escrow agent. With regard to the replacment land, I'll defer a confident answer to another contributor - I think one solution might be to prorate the carryover basis based on the ratio of replacement land FMV to building FMV, and adjust depreciation on building accordingly. One thing to be aware of - if interest is paid on escrow proceeds in 2005, you'll need to report interest in 2005 (assuming t/p keeps interest). Also, any ordinary income/expense adjustments on the sale of relinquished property need to be reported in 2005. Hope that helps. | |
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