California's new filing requirement for like-kind property
exchanges made under IRC Section 1031 covers like-kind exchanges
that occur in tax years beginning on or after January 1, 2014.
All taxpayers who defer tax by exchanging property in California
for like-kind property outside of California must now file a Form FTB 3840 annual information return for
each completed exchange. It applies to all individuals, estates,
trusts and business entities, regardless of their residency status
or commercial domicile.
The new form provides information about the California and
non-California properties involved in the exchange. It is meant to
track taxpayers' deferred gains from California properties and
strengthen the enforcement of a "clawback" provision in
the California tax code that applies to like-kind exchanges.
Under the clawback rules, the originally deferred gain from the
sale of a California property is considered California-source
income whenever the non-California
