All taxpayers, regardless of residence status or commercial domicile, who exchange real property located in California for like-kind property located outside of California, must file form FTB 3840 with their California tax return. TurboTax will prepare the form and include it with the California return.
Form FTB 3840 must be filed for the taxable year of the exchange and for each subsequent taxable year, generally until the California source deferred gain or loss is recognized on a California tax return.
To report the acquisition of the partnership interest in exchange for contribution of property interest, list the property received in the exchange on Form 3840, Part II, Line 9. Indicate if the property is located in California and the taxpayer's percentage of ownership.
Enter the full address where each property received is located. If the property received does not have a street address, then provide the assessor's parcel number, the county, and the state in which the property is located. Follow the step by step instructions in TurboTax.
If you exchange a California property received in a 1031 exchange for interest in a UPREIT, the exchange is still tax-deferred (see this Franchise Tax Board technical manual) but under IRC section 721, and you will no longer be able to perform subsequent 1031 exchanges with that interest. You will also be taxed when you sell your interest in the UPREIT.
See here for 2024 California information and instructions for the completion of Form 3840.
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