Our client is a California resident. He has a Massachusetts  rental property and 1031 exchanged to a CA rental property with higher FMV. He shouldn't owe any capital gain tax regarding this transactions on Federal and MA state level based on my research. However, when I input this 1031 transaction in Lacerte, it ask my client to pay capital gain tax in MA. I also did a test that if I put the new property state as MA, the capital gain tax was remove on MA tax form. I am a little confused. Does MA has a different 1031 exchange rule that forbids the non resident to exchange a property out of state? MA tax expert. Please help me. Thank you!!!