New FTB Form for Like-Kind Exchanges
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September 29 2014
Purpose of Bulletin
To inform staff that FTB now has its own California form FTB 3840, California Like-Kind Exchanges for the 2014 taxable year.
On June 27, 2013, Assembly Bill 92 was signed into law, adding California Revenue & Taxation Sections 18032 and 24953. The new law creates an annual information reporting requirement for taxpayers that claim non-recognition of gain or loss for a like-kind exchange pursuant to Internal Revenue Code (IRC) Section 1031, when property located in California is exchanged for property located outside of California. For such an exchange, taxpayers are required to file the new form FTB 3840 in the taxable year of the exchange and in each subsequent year in which the gain or loss attributable to the exchange has not been recognized.
New Filing Requirement
Form FTB 3840 is required for taxpayers who during taxable years beginning on or after January 1, 2014, defer gain or loss under IRC Section 1031 when they relinquish personal property located within California and acquire like-kind property located outside of California. The mandatory filing requirement applies to all individuals, estates, trusts, and all business entities regardless of their residency status or commercial domicile.
Form FTB 3840 must be filed for the taxable year of the like-kind exchange and each subsequent year that gain or loss is deferred, regardless of whether the seller or exchanger has any other California filing requirement.
If the taxpayer already has a California filing requirement, the form FTB 3840 will come in as an attachment to the return. If the taxpayer does not have a California filing requirement for any purpose other than the like-kind exchange, the taxpayer must send the form FTB 3840 to the following address:
Franchise Tax Board
PO BOX 1998
Rancho Cordova CA 95471-1998
For taxpayers with a California filing requirement, the due date for the form FTB 3840 is the same as that of the tax return being filed. For taxpayers who do not have a California filing requirement and are required to file form 3840 separately, the due date will be the same date as if the taxpayer had a California filing requirement.
Failure to File
If the taxpayer fails to file the form FTB 3840 as required, we may issue a Notice of Proposed Assessment to adjust the taxpayer’s income for the previously deferred gains, plus any applicable penalties and interest.
A draft of form FTB 3840 will be available on our public website by late October. We have established an e-mail address for comments or suggestions for the form FTB 3840. Suggestions or concerns may be e-mailed to: 1031AnnualFIling@ftb.ca.gov.
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