Basis difference, Federal vs MD State

Forum|Forum|2 months ago
March 25, 2026
1 reply
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I am preparing Federal and MD state individual income tax returns for 2025 for a non resident of MD that sold real estate located in MD in year 2025.

The MD property purchase was replacement property, in a like kind exchange, upon sale of property located in WA state, in year 2021. Taxpayer has always been a Washington state resident, thus the 2021 sale did not result in gain in MD.

As there was no MD gain, and, consequently no deferred MD gain, do I simply enter basis on line for "Cost or other basis" for 2025 Federal tax return, and (different) basis where called for in the "State, if different" section on lacerte screen 17.1?

Thanks for any and all help!

Lacerte Tax

sjrcpa

Level 15

I don't think MD will let you get away with a different basis than federal for this circumstance.

In general MD follows federal unless they specifically don't.

The more I know the more I don’t know.

B

BPM11Author

Level 2

Thanks very much for your help

It just seems strange to me that, at the end of the day, a state will tax capital gain realized

a) by a person that has never resided in that state

b) on sale of property not located in that state

As I prepare this return, I find myself wondering if there aren't other taxpayers not aware that like kind exchanges involving real estate in two different states can result in a state tax that would never have been owed, had the like kind exchange not been pursued

sjrcpa

Level 15

On the other hand, if the original property had been in CA, CA would tax that gain now.

The more I know the more I don’t know.

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