Sec. 1031 exchanges — The ins and outs of depreciating MACRS property

Description

Abstract: Section 1031 - or like-kind - exchanges in the commercial real estate arena often include property subject to the modified accelerated cost recovery system (MACRS). Those who receive MACRS property in such an exchange must comply with complex tax regulations for determining the amount of annual depreciation allowed. Under the regs, the basis of MACRS replacement property comprises both a depreciable exchanged basis and a depreciable excess basis. This article explains what each is and which depreciation rules apply to each. A sidebar lists types of property that qualify for bonus depreciation.