USA Passive Income Loss and 1031 Exchange

Nov 6, 2017
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United States
This Question is Specifically About a Hypothetical 1031 Exchange Transaction Combined with a Passive Loss on a Different Asset in Same Tax Year

Let's say a client has a $4,000,000 Building he is selling. He has a $2,000,000 basis, then he exchanges into a $3,600,000 Building.

This $3,600,000 building then has a Cost Segregation Study done it and it is determined that there is $1,000,000 of 5 Year Property that can be depreciated with Double Declining Balance.

Can the investor allocate his basis to the more depreciable property? If not, where does it say in the code that he cannot?

Can he then take the accelerated depreciation on the replacement property to offset against any boot capital gains tax he takes out of the exchange in the previous property?

Can he take the boot out of the exchange in 2018 to do the same by using 2018 Accelerated Depreciation to shelter boot received in 2018?

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