No, California just wants the tax on the California gain that was deferred.  Let's say the basis was $100K, it was exchanged for a property worth $200K, which was then sold for $300K.  You owe federal tax on $200K but California tax on only the $100K that escaped tax in the first transaction.  I can see all kinds of problems with this type of deal:  What if improvements were made to the replacement property for $50K, but then it was sold for only $220K?  You're lucky if you don't have to deal with such issues. 

I would call this a 4797-type puzzle.  The best way to complete a 4797 is to know before you start what answer you should get, and then make sure all the lines lead to that result.  And is California demanding an e-filed return?  How much time does it take to complete two pages on a fillable pdf, put it in an envelope with a check and mail it with a postage stamp?