I've recently come across Internal Revenue Code section 1031, which as I understand it allows me to postpone paying taxes on income from the sale of an investment property, so long as I purchase a similar investment property of equal or greater value within 180 days.
From wikipedia, this specific section stuck out to me (emphasis mine):
This would result in a gain of $50,000, on which the investor would typically have to pay three types of taxes: a federal capital gains tax, a state capital gains tax and a depreciation recapture tax based on the depreciation he or she has taken on the property since the investor purchased the property. If the investor invests the proceeds from the $250,000 sale into another property or properties (without touching the proceeds and using a Qualified Intermediary), then he would not have to pay any taxes on the gain at that time.
But when I purchase a new investment property with the money from the sale of the old investment property, wouldn't that new property begin its depreciation schedule anew, allowing me to once-again depreciate that property against my income for the next 27.5 years?
If so, that means that I'm getting the benefit of depreciation again. Would that mean I could then sell (exchange) the second property for a third, once-again resetting the depreciation schedule on a new property?
If not, can someone explain the reason why not?
I'm expecting that this isn't possible as it seems too good to be true, but I can't find any details explaining why it's not possible.