Depreciation consequences of like-kind exchanges and involuntary conversions: in reviewing the new IRS guidance for property received in like-kind exchanges and involuntary conversions, special attention should be paid to the election.

Practical Accountant, The, May, 2004 by Howard W. Wolosky

The Government is providing definitive guidance for computing depreciation deductions under the Section 168 Modified Accelerated Cost Recovery System (MACRS) when property is acquired in a like-kind exchange or as a result of an involuntary conversion, including automobiles, subject to the Section 280F depreciation limitations.

It is in the form of regulations, temporary and final (T.D. 9115) and proposed (REG-106590-00, REG-138499-02), where the temporary regulations also serves as the proposed ones.

The guidance was necessitated by the IRS having recently discovered inconsistent depreciation treatment with regard to the basis of replacement property. Some taxpayers were depreciating the replacement property using the same depreciation method, recovery...