Answer
Feb 13, 2025 - 11:30 AM
Again, yes. So when you invest in a DST in a 1031 exchange context, you're carrying over the depreciable cost basis of the property you sold. And so that depreciation schedule essentially just continues after your exchange. However, to the extent that you acquired more real estate in your exchange than you sold, meaning that the DST had higher leverage or higher loan-to-value ratio. And so mathematically, you're actually buying more real estate than your exchange. That incremental increase in real estate is newly depreciable and will actually increase your depreciation deduction above and beyond whatever depreciation schedule you have going into the exchange.
