CA Form 3840 and IRC 721
In 2017, I exchanged a rental property in California for multiple properties located out of state. Since then, I have been filing CA Form 3840 annually as required. In 2024, under code section 721, I contributed these properties to a partnership in exchange for partnership units equivalent to my original equity. As a result, I will receive K-1 forms to report on my tax return for 2024.
I have questions about how to reflect this event on Form 3840 for California purposes. Should I remove the properties from the form and include a statement? What specific information should I include in that statement when you remove the properties from Form 3840? Additionally, must I provide extra documentation to the California Franchise Tax Board (FTB) for the section 721 exchange? The California FTB does not give specific instructions regarding a section 721 exchange, so I am uncertain about the correct procedure.
