Final settlement statements for both exchange properties
CALIFORNIA 1031 REPLACEMENT PROPERTY
Reviewed August 28, 2026 · Updated for current federal bonus-depreciation guidance
The replacement property price is not automatically its tax basis.
A cost segregation study can analyze replacement real estate acquired through a qualifying Section 1031 exchange, but the engineering team should not begin with the purchase price alone. The owner’s CPA must first establish the replacement property basis using the exchange records, Form 8824, prior depreciation and any additional money or property involved.
- ✓ No study work before payment
- ✓ CPA-ready final report
- ✓ California statewide
WHY IT MATTERS
Move eligible basis into faster recovery periods.
Cost segregation classifies supported depreciable basis; it does not decide whether an exchange qualifies, calculate recognized gain or replace the CPA’s exchange-basis work. Carryover history, excess basis, land allocation, prior short-life assets and later improvements should be reconciled before the study schedule is delivered. California depreciation differences also mean the owner may need separate federal and state schedules.
Plain English: you are not creating a new deduction. You are identifying when supported pieces of the property may be depreciated.
WHAT WE REVIEW
What to assemble before screening replacement property
Completed or draft Form 8824 and exchange-basis workpapers
Relinquished-property depreciation and fixed-asset schedules
Replacement-property appraisal and land allocation support
Additional cash, debt, recognized gain and exchange expenses
Later renovations and separately purchased equipment
SHOW ME THE NUMBERS
Why purchase price alone is not enough
Illustrative only. This assumes a 37% federal marginal rate where shown and that the owner can currently use the deduction.
- Property value
- $5,000,000 replacement property
- Estimated depreciable basis
- CPA-confirmed exchange basis required
- Potential faster basis
- Calculated after basis reconciliation
- Potential upfront federal effect
- Depends on eligible basis and tax position
- Study or comparison benchmark
- Form 8824 and prior schedules required
This is a timing illustration, not guaranteed permanent tax savings. California commonly requires a separate depreciation schedule because it generally does not conform to federal bonus depreciation.
DOES IT FIT?
Strong candidates usually have four things.
✓
Replacement property is held for business or investment
✓
CPA has established or can establish depreciable basis
✓
Prior depreciation records are available
✓
Owner can currently use additional depreciation
PORTFOLIO PRICING
More properties. Lower cost per study.
Order and pay for the properties together to receive a simple portfolio discount.
2 properties5% off3 to 4 properties10% off5+ properties15% off
STRAIGHT ANSWERS
Frequently asked questions.
Can a 1031 replacement property receive a cost segregation study?+
Potentially. The study can classify supported depreciable basis after the CPA establishes the exchange basis and reconciles prior depreciation, land and separately scheduled assets.
Does the new purchase price become the depreciable basis?+
Not automatically. IRS guidance generally carries basis from the relinquished property into the replacement property, with adjustments for the transaction. Form 8824 and the CPA’s workpapers should control the starting basis.
Does cost segregation determine whether the exchange qualifies?+
No. Exchange eligibility, deadlines, recognized gain, related-party rules and Form 8824 reporting belong with the owner’s CPA, attorney and qualified intermediary.
Can bonus depreciation be assumed on the full replacement price?+
No. Eligibility depends on the supported basis, asset class, acquisition and placed-in-service facts, prior use and applicable elections. The CPA should approve the federal treatment and California adjustments.
Is the free estimate a completed study?+
No. It is an illustrative screen using the facts you provide. No engineering takeoff, professional certification or tax opinion is included. Technical work begins only after a signed and paid engagement.
Does my CPA need to approve the study first?+
No. It is smart to ask whether you can currently use additional depreciation, but the paid study does not require advance CPA approval. Your CPA makes the final filing decision.
Do you guarantee tax savings?+
No. A study accelerates the timing of eligible depreciation. Results depend on basis, property facts, placed-in-service dates, passive-loss rules, tax rates and the owner's filing position.
AUTHORITATIVE SOURCES
Reviewed against current IRS and California guidance.
Last reviewed August 28, 2026. Tax rules and procedures can change. Your CPA should confirm the law that applies to your acquisition date, placed-in-service date and return.
IRS Topic 704: Depreciation↗IRS Cost Segregation Audit Technique Guide↗IRS Notice 2026-11: 100% bonus depreciation guidance↗IRS Notice 2026-16: qualified production property↗California FTB federal tax change summary↗IRS Instructions for Form 8824↗IRS Publication 544: Like-Kind Exchanges↗IRS Publication 551: Basis of Assets↗IRS Like-Kind Exchange Tax Tips↗
FREE PRELIMINARY PROPERTY SCREEN