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Cash payments complicate depreciation of assets in like-kind swaps.(DEPRECIATION, Internal Revenue Service )(Brief Article)
Kiplinger Tax Letter, The, March, 2004
Depreciating assets acquired in like-kind swaps is tricky. Generally, property that is received in a tax-deferred exchange has the same income tax basis for depreciation as the traded property.
Any extra cash payment from the seller complicates the matter.
Taxpayers will have to make two sets of depreciation calculations after a like-kind exchange. The unrecovered tax basis of the old asset is depreciated over its remaining depreciable life. And any extra basis attributable to cash payments is depreciated like a newly acquired asset.
New IRS regulations provide more details, such as complex rules on figuring depreciation write-offs when business vehicles are traded. The rules are in effect now, unless filers elect to take lower deductions...
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