All Forum Posts by: Rizwan Misbah

Thank you @Bill Exeter for the response. That was my initial thought as well but other CPA's are telling me that it is a difference of opinion on whether the gain recognized due to boot is first 15% gain or 25% recapture. Do you have any reference to IRC section? I looked around but did not see anything specific regarding the order of taxation. 

Edited to add some reference to sources that state no hard set rules on what boot is taxed at specific to a 1031 exchange

http://1031cpas.blogspot.com/2010/06/what-is-tax-r...

Hi everyone, long time lurker, first time poster. Had a question regarding a partial 1031 exchange and how 1250 depreciation recapture is calculated, facts are below.

12/1985 - 2 flat property purchased for $60k, residential rental real estate (fully depreciated today, 0 tax basis)

6/2016 - enters into 1031 exchange, sells above property for $150k, receives property (also residential real estate), FMV of $100k, $50k in cash also received.

So we are deferring the $100k of gain due to the 1031, and recognizing the $50k as capital gain. My question is regarding the 1250 depreciation recapture. Do I split the recapture amount pro rata and $40k of it stays with the exchanged property and recognize $20k in recapture and $30k as cap gain?

Or do I recognize all $50k as recapture and the remaining $10k stays with the deferred? Or can I push all the recapture to the basis of the new exchanged property and not recognize any depreciation recapture this year?

I don't plan on selling this property in my lifetime (you never know) and will pass on to children who can benefit from the step up to FMV when I am gone.

Any help is greatly appreciated.