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We are looking to purchase a property with a current "credit tenant in place in a 1031 exchange. We would be receiving the monthly lease payments from the tenant. What are the tax implications of the sale and then purchase of the lease? Currently, we are depreciating the building on the current property since we own it. So if we sell it, and do a 1031 exchange to purchase a new property with a tenant in place, are we able to deduct any depreciation or expenses on the new property or do we carry over the basis from the other property?
So if we were to find a credit tenant that wanted to use our land to build their business on and we entered into a land lease, they would get to depreciate the building, not us, is that correct? Since we really don't own the building, just the land.