Basis in replacement property from like-kind exchanges.

• Jurisdiction: United States
• Date: 01 October 2000
• Author: Moore, Philip E.

In notice 2000-4, the IRS issued new guidance on depreciation of replacement property acquired through a like-kind exchange under Secs. 1031 and 1033. Before the notice, there was little direction on how to depreciate the basis of acquired property in a tax-deferred exchange under Sec. 168, 1031 or 1033. The principles outlined in this notice are effective for tax years ending after Jan. 3, 2000, and will remain in effect until Treasury issues proposed regulations.

Depreciation Treatment of Acquired Property

The depreciation allowable for tangible property placed in service after 1986 generally is determined under Sec. 168. Because no gain or loss is recognized under Secs. 1031 and 1033 on the exchange of property held for the productive use in a trade or business or for investment, the basis of property acquired is generally the same as the basis of the property surrendered in the transaction, less any cash received, plus any gain recognized on the exchange. Any additional amounts invested in...