Question

Schedule E - Vacation Rental Properties

Forum|Forum|1 year ago
March 26, 2025
2 replies
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I had a vacation rental property sold in Aug 2024 and used a 1031 Exchange to purchase a different property in Sep 2024. The SAME management company managed BOTH units during the year. Asa such they only sent me ONE 1099-MISC form with totals that include BOTH properties. What should I do ??? Try to break out the 1099-MISC amounts ands "fake" Turbotax into thinking I have two separate 1099-MISC statements, one for each property ??? Thanks.

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DianeW777

Yes, you can break out the 1099-MISC amounts into two. The choices are enter two 1099-MISCs or simply enter the correct income in the correct rental properties an keep the form in your file. The IRS knows the income is for rents and so likely no questions later on.

Section 1031 Like Kind Exchange Tax Information:

Depreciation Rules:

The basic concept of a 1031 exchange is that the basis of your Old Property rolls over to your New Property. In other words, if you sold your Old Property for $100,000, and bought your New Property for the same, your basis on the New Property would be the same. It makes sense then that your depreciation schedule would be exactly the same, and does not change! In other words, you continue your depreciation calculations as if you still own the Old Property (your acquisition date, cost, previous depreciation taken, and remaining un-depreciated basis remain the same).

Buy Up:

If you 'buy up' in your exchange (your New Property cost more than you sold your Old Property), the answer is easy – you treat the buy up part as you would a new addition to an existing property. In other words, you treat the amount of the buy-up the same as you would the cost of construction, for example, of a garage added to an existing house – the cost is the amount of the buy-up; the date you start depreciating it is the date you purchased the new property; and the depreciation method you use is the method most appropriate for that type of property in the year you bought the New Property (regardless of the method you used for the original house). If you think of it this way, then it's easy, even if your property is a large office building or a more complex purchase.

Boot:

Any property or money you might have received that is unlike property in the exchange would be immediately subject to capital gains tax.

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semjeitoAuthor

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semjeitoAuthor

I understand the challenges. The following links will give your contact information for TurboTax.

Thanks for the links.

I essentially started again from scratch over the weekend and it seemed to work the 2nd time around. The program did properly recognize the like kind exchange and I'm now getting the proper refund instead of having to pay a large amount in capital gains taxes.

I believe my mistake was to tell Turbotax I was selling the 1st property when inputting data under Schedule E Rentals, Royalties, etc. I noticed 2nd time around there was very small print on the screen indicating I should not show a sale in the Rents., Royalties section. I instead reported the like kind exchange under Sale of a Business as a Like Kind Exchange and it worked great.

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jbnielsen

The one should give all necessary information. You are reporting a sale and purchase, which are treated as one transaction under 1031. If you need information not provided on the form, contact the management company.