Review the replacement asset the product proposes after an exchange or a deferred conversion, and accept it once it reads right.
Where this is in the app
Dashboard → open the return → Assets tab → open the asset → Dispose → Disposition Kind → Like-kind exchange (§1031) or Involuntary conversion (§1033)
This panel mounts after you record the disposition. There is no way to open it on its own. See Record a like-kind exchange.
After you record a like-kind exchange, or a condemnation or casualty where you elected §1033 on a gain, a panel mounts headed Replacement property — §1.168(i)-6 continuation.
Nothing is created until you click Accept.
What the panel shows
The proposal is split into up to two legs, each in its own card:
Leg | Header | Sub-label |
Carried-over basis | Continuation (exchanged basis) | §1.168(i)-6(b)(7) — carries the relinquished schedule |
Anything above it | New MACRS (excess basis) | §1.168(i)-6(b)(8)/(d) — fresh, placed in service at the replacement date |
The two legs' bases sum to the carryover basis the previous step handed over.
Each leg shows six fields. Four are editable: Depreciable basis, Recovery period (years), Method, and Convention. The other two, Placed in service and First-year depreciation (estimate), are shown as text and cannot be changed here. The continuation leg's placed-in-service date is the relinquished asset's; the excess leg's is the replacement date.
The basis handed into this panel comes from the step you just completed. On a like-kind exchange it is the carryover basis. On a §1033 election it is the substituted basis, which is not the replacement's cost. It is never the replacement's fair market value.
A note under the legs reads: "First-year depreciation is a preview estimate; the filed figure is computed from the saved asset through the depreciation engine after you accept."
Steps
Read both legs. Check the basis split and the schedule fields carried onto the continuation leg.
Edit anything that needs it. Change the recovery period, method, or convention on the continuation leg and the panel flags the departure inline, reading: "This recovery period departs from the §1.168(i)-6 carryover inherited from the relinquished asset. You can still file it, but it no longer continues the original schedule." Editing the basis, or editing anything on the excess leg, does not raise the flag.
Click Accept & create replacement asset. The button reads "Accept & create replacement assets" when there are two legs.
Where a Cancel button is offered, it closes the panel without creating anything.
Electing out
A checkbox at the top reads Elect out under §1.168(i)-6(i), described as "Treat the entire basis as new MACRS property placed in service [replacement date], instead of continuing the relinquished asset's schedule." It is off by default. Check it and the figures recompute immediately: the two legs collapse into a single New MACRS (excess basis) leg and the Accept button turns singular. The explainer that appears reads:
Election-out forgoes the carryover continuation: the relinquished asset's remaining basis is treated as disposed and the full replacement basis depreciates fresh from [replacement date]. One new-MACRS asset is created instead of the two-basis split.
An optional Election note field appears, labelled "captured for the filer's records." When you accept with the election on, the note is saved with the election.
Same-year notice
If the relinquished asset was placed in service and relinquished in the same tax year, a blue notice says it takes no depreciation in the replacement year, and that the continuation leg picks up from the placed-in-service year.