Does PA recognize a 1031 transaction for rental property located in SC

[pwadvisors]

I am a PA resident with a rental propriety in SC. I sold the retail property in SC, but did valid 1031 exchange. I understand that PA does not recognize 1031 exchanges. Since the 1031 exchange defers the tax on the sale in SC, do I still have to report the sale in PA as a taxable transaction in the year of sale and pay the PA state tax on the sale? If so, I will get taxed twice on this sale for state tax purposes

[ErnieS0]

Yes. Report the sale on your Pennsylvania income tax return because PA does not recognize like kind exchanges.

Pennsylvania tax law contains no such provision, the difference between the basis of the old property and the current market value of all property received, including cash and cash equivalents, in exchange is the taxable gain and reported on PA-20S/PA-65 Schedule M, Part B, Section B, Line c.

Definitions of the like-kind properties can be found in IRC Section 1031.

You will not get taxed twice. You will have a separate cost basis for the property for federal, South Carolina and Pennsylvania purposes. The tax gain will be added to the cost basis for Pennsylvania purposes.

[NYC124785]

Hello,

I understand that PA finally conforms to Fed IRC 1031. But I cannot figure out how to report this and defer my gains on the PA-40 return. Is there a form? The gain is showing on Schedule D of the PA-40 and producing a recognized gain causing taxes payable. I looked at the form online and nowhere on the form does it mention like-kind exchanges or section 1031.

Can someone please help?! Much appreciated!

[DianeW777]

You are correct.  There is no specific or different form for Pennsylvania (PA).  There is a button you missed that allows you to select 'this is not taxable in PA'.

When you reach the screen 'Gain and Loss Summary' select the property to edit.  On the screen 'Schedule of Gains/Losses' be sure to select 'This sale is not taxable in PA'.

                                                           

@NYC124785