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    #1

    Inherited Property

    In May 2008 my client's father passed away. She inherited half of her fathers home and half of his shop building. Her brother inherited the other half of each property. Each of them showed income and expenses for half the rental home and the shop building that were rented out. In Nov 2009 my client gave her brother her half of the shop by doing a grant deed and the brother gave her his half of the home by doing a grant deed. So my client as of Nov 2009 owned 100% of the rental home and her brother owned 100% of the shop building. My thought was for my client to just show the other half of the basis her brother had reduced by depreciation he toke as her adjusted basis going forward 11/09 on the other half of the rental home and then just stopping depreciation on the shop building as of 11/09 as her brother will be claiming 100% of the shop building. We don't know what the brother claimed for depreciation I can only assume because they are not on speaking terms. Any other ideas? Should I report this as a like kind exchange?

    GTS1101
    Tags: None
    #2
    It is not a gift each is making - I wouldn't look at it that way. So, could it be a sale to each other? I assume they were the same in value? If not, related party transactions would make the basis different - for depreciaton for example. Or if there was a loss involved, the loss could not be taken, but carries with the property. Check page 50 of Pub 550.
    JG

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      #3
      House building swap

      Why wouldn't this be a Section 1031 transaction?


      They both seem to qualify as investment property.

      Comment

        #4
        Because they didn't use a qualified intermediary.
        JG

        Comment

          #5
          1031

          A qualified intermediary is not a requirement for a 1031. Section 1031 is not an election.

          If the details of the transaction fit the qualifications, it is a 1031.

          Comment

            #6
            A qualified intermediary is only required for a delayed exchange or one in which there are more than two parties involved. When you trade in a business auto for another one that's a 1031 exchange with no qualified intermediary.

            Comment

              #7
              Davc

              Exactly correct. 1031 is not an option.

              Comment

                #8
                Originally posted by DMICPA View Post
                Exactly correct. 1031 is not an option.
                I think what was said is 1031 does apply
                Believe nothing you have not personally researched and verified.

                Comment

                  #9
                  When he said, "1031 is not an option," he meant it was not optional. Such a transaction as described above is a 1031 exchange situation, and must be treated as such.
                  Last edited by Burke; 08-08-2011, 02:25 PM.

                  Comment

                    #10
                    I'm reading these and realize I spoke too quickly (and was wrong). Sorry GTS,
                    JG

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