Use Form 8824, Like-Kind Exchanges, on the Federal return to report exchanges of qualifying business or investment real property for real property of a like kind. For exchanges of real property used in a trade or business (and other noncapital assets), enter the gain or (loss) from Form 8824, if any, on Form 4797, line 5 or line 16. See IRS instructions for Form 4797
Does your California return have Form 3840? That form is required if both of the following occur:
- An exchange of one or more California real properties for one or more real properties located outside of California
- Any portion of the California sourced realized gain or loss is not recognized
If required, taxpayers must file FTB 3840 in the year of the exchange and each year after until the deferred gain or loss is recognized.
California generally conforms to Federal IRC section 1031. Can you clarify whether and how the transaction is treated differently on your Federal and State returns?
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