1031 Question

[Oh Baby!]

Individual sells property A for $100 (and let's for simplicity just say a $100 gain). Individual takes the proceeds and purchases property B for $300 together with a partner. The original individual contributes $200 for a 66% ownership of the Property B and the new partner contributes $100 for a 33% share of the new property.

Ordinarily, I would reduce the depreciable basis of the new property by the amount of the deferred gain. but I cannot do that here or else the new partner will show a much larger gain when the new property is sold. what i want to do is to reduce the equity basis of the original partner and make no adjustment to the value of the property.

Is this correct or is there a different way to do this?

As always....thanks in advance for your help!

[Bart]

Individual sells property A for $100 (and let's for simplicity just say a $100 gain). Individual takes the proceeds and purchases property B for $300 together with a partner. The original individual contributes $200 for a 66% ownership of the Property B and the new partner contributes $100 for a 33% share of the new property.

Ordinarily, I would reduce the depreciable basis of the new property by the amount of the deferred gain. but I cannot do that here or else the new partner will show a much larger gain when the new property is sold. what i want to do is to reduce the equity basis of the original partner and make no adjustment to the value of the property.

Is this correct or is there a different way to do this?

As always....thanks in advance for your help!

Sounds to me like the individual sold a property and bought an interest in a partnership. That is not like-kind.

[jainen]

>>the new partner will show a much larger gain when the new property is sold<<

What's that got to do with the original individual? His basis is whatever it is. But if he "sold" the old property and "bought" new property with a "partner," Section 1031 is irrelevant anyway.

Generally I do like to keep discussing 1031, but I do get tired of putting those three words in quotes.

[michaelmars]

jainen is right but if you have a case where different partners have different deprciable basis just set up the asset as 2 buildings for each partner and/or with deprciable basis and nondepr basis. this will just be a work around so that the program calculates the depr and you don't need outside worksheets.