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My company sold a $10M Hotel in May 2017 for a gain of

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My company sold a...

My company sold a $10M Hotel in May 2017 for a gain of $500K. We purchased an $11M Apartment Complex on 11/16/17. This qualitifies as a 1031 like-kind deferred tax exchange.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I need to record the purchase of the new property and include the gain from the previously sale. What does the Journal entry look like?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I just need a generic standard journal entry, I recorded the assets from the settlement sheet as debits & liabilities as credits, but need to understand how to account for the $500K gain from the sale in May 2017.

Submitted: 7 months ago.Category: Tax
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11/19/2017
Tax Professional: Shan-Nel Simmons, Enrolled Agent replied 7 months ago
Shan-Nel Simmons
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Customer reply replied 7 months ago
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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 7 months ago
taxmanrog
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Hi! Different expert here.

You do not record the gain. The point of the §1031 exchange is just that - the old assets are exchanged for the new ones. So if you had a $10M hotel that you exchanged for a building that was $11M, you would record only assets up to your basis in the old assets. The gain is not recorded.

This is a common question that I get when I teach advanced accounting accounting classes.

Similarly the assets are only depreciated based on the old assets' remaining undepreciated balance.

I hope this answers your question. If you have any more, please feel free to ask and I will be happy to answer.

Thanks! Have a great weekend!

Roger

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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 7 months ago

I have not heard back from you. Do you have any more questions? Is what I said clear?

Please don't forget to rate me, as this is how questions are closed.

Thanks! Have a great weekend!

Roger

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